RecoveryAudits Booklet

Prepare for
Recovery
Audits
American Academy of Professional Coders

2480 South 3850 West, Suite B
Salt Lake City, Utah 84120
800-626-CODE (2633), Fax 801-236-2258
www.aapc.com
Prepare for Recovery Audits
Protect Your Practice
Written by:
Deborah Grider, CPC, CPC-I, CPC-H, CPC-P, COBGC,

CEMC, CDERC, CCS-P
Prepare for Recovery Audits Copyright ©AAPC 2009 1

DISCLAIMER
This course was current at the time it was published. The materials are offered as a tool to assist
the participant in understanding how to prepare for a Recovery Audit to protect the medical
practice. Every reasonable effort has been made to assure the accuracy of the information within
these pages. Every insurance company has processing and reimbursing procedures particular to
it. As such, instructions and recommendations given in this booklet may not apply to all
insurance carriers. Check with your individual carriers for specific coding and policy guidelines.
The American Academy of Professional Coders (AAPC) employees, agents, and staff make no
representation, warranty, or guarantee that this compilation of information is error-free, and will
bear no responsibility or liability for the results or consequences of the use of this course.
NOTICES
Current Procedural Terminology (CPT®) is copyright © 2008 American Medical Association.
All Rights Reserved. CPT® is a registered trademark of the American Medical Association
(AMA).
PREPARE FOR RECOVERY AUDITS:

PROTECT YOUR PRACTICE
Written by:
Deborah Grider, CPC, CPC-I, CPC-H, CPC-P, COBGC, CEMC, CDERC, CCS-P
2
Prepare for Recovery Audits CPT® Copyright AMA –All Rights Reserved

CONTENTS
FORWARD.....................................................................................................................................4
INTRODUCTION ..........................................................................................................................5
WHAT TRIGGERS AN AUDIT………………………………………………………………….7
What Auditors Look For……………………………………………………..……………7
The Insurance Audit………..…………………………………………………………….12
RECOVERY AUDITS…..............................................................................................................15
The Retrospective Audit…………………………………………………………………16
Government Audits………………………………………………………………………18
Comprehensive Error Rate Testing Program (CERT).....………………………………..19
Recovery Audit Contractors (RAC)…………………………………………………..…33
The Permanent RAC Program…………………………………………………………...42
Preparing for a RAC Audit………………………………………………………………44
APPEALS……………….……………………………………………………………………….47
The Medicare Appeals Process…………………………………………………………..47
Responding to Post-Payments Audits and Refund Requests…………………………….50
Responding to a CERT, RAC, or Government Audit..…………………………………..53
Refunding Overpayments….………………………………………...………………......55
PREVENTION…………..............................................................................................................57
CONCLUSION………………………………………………………………………………..…59
APPENDICES and SLIDE PRESENTATION…………………...…………………………..…60

FORWORD
Internal billing audits are vital to the health of a medical practice. An annual audit allows the
medical practice to identify specific coding issues that may occur or repeat in similar claims
submissions. If you identify abhorrent coding patterns, more frequent audits may be beneficial.
Careful pre-submission monitoring and review of similar claim types may safeguard against
errors that could result in either claim denial or audit recovery from an insurance carrier
(commercial payer, third-party payer, or a government carrier). An internal audit gives the
physician and medical practice staff the opportunity to identify incorrect coding and billing
patterns, and over utilization of procedures and services, before an outside auditor recovers
payments or assesses fines and penalties. This guide is a general summary of types of Recovery
Audits and steps the medical practice might take to inoculate itself from paying back a carrier for
inappropriate claim submission, paying fines or penalties, or criminal charges. An Internal
Billing Audit can help insure appropriate payment and compliance with applicable laws and
carrier regulations.
Auditing physician charges and billing practices is burdensome, but ultimately will improve
claims management processes, cash flow, and compliance with insurance carriers and applicable
laws and regulations.
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INTRODUCTION
The practice of medicine has undergone a transformation with the advent of federal coding and
reimbursement regulations. Medical coding is a language all its own, but not an exact science.
Procedure codes describe services, provided by the practitioner and billed to the insurance
carrier, using the Current Procedural Terminology (CPT®) and the Healthcare Common
Procedural Coding System (HCPCS). The CPT and HCPCS Level II manuals assist in capturing,
recording, and reimbursing medical procedures. Many codes are added, deleted, and revised each
year.
Medical necessity for services provided must be supported using the International Classifications
of Diseases, Clinical Modification-9th revision (ICD-9-CM) to report diagnoses. These codes are
subject to intense review, and are used for analysis by government and the insurance industry.
The most significant use of statistical analysis in the health care industry is to identify and
recover dollars spent for fraud, waste, and abuse.
To ensure that documentation satisfies the level and scope of services provided, health care
providers should be aware of government and third-party insurance carrier billing requirements.
Many insurance carriers recoup millions of dollars in refunds from providers unable to justify the
care provided.
Providers should know that the insurer’s fundamental existence and financial success requires
detailed analysis of each provider’s practice patterns using information management systems.
Insurance companies make a huge financial commitment to information technology that
identifies over-utilization of medical services.
As a result of this technology, insurance carriers have extensive data banks. The insurance carrier
generates profiles by gathering data indicating how often a provider performs a particular
procedure, where the procedure is performed, and what CPT code is reported for that procedure.

Insurance companies then compare the provider’s profile to other providers with similar patient
populations.
Insurance carriers maintain data banks that compare how often a provider orders laboratory tests
and what tests he or she orders, and that generate provider profiles based on this information. In
addition, diagnoses codes are also tracked to determine frequency and medical necessity for the
service provided. This data-mining activity is performed by highly-qualified, trained individuals,
whose job it is to conduct data-runs to help the carrier optimize its efforts to identify the most
frequently billed codes and compare that information across specialty areas.
If the insurance carrier determines that the provider or group of providers has billing or coding
patterns that deviate from other providers of similar specialties in a geographical area, the
insurance carrier likely will perform an investigation such as an audit, or request refund of
services based on the claims data compiled. Unfortunately, a provider is usually unaware that his
or her billing patterns are unusual until the carrier begins an expanded investigation. In most
cases, the provider is completely surprised to learn that he or she is subject to an insurance audit.
Collecting from insurance carriers has become more difficult each year. Delays and denials of
payments have forced practitioners to spend money hiring additional staff, or to employ a
company to collect their submitted claims, which in turn has reduced the profits within the
practice. The latest challenges we must overcome is post-payment audits (paybacks) and take
backs, in which the insurance carrier just “takes back” the money by deducting future payments
without requesting the return of monies paid.
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Today, many providers of health care services are receiving
notices from insurance carriers demanding that the provider Especially today, with our
repay a substantial sum for claims previously billed and paid downturned economy,
without objection. You might hear all the time from the insurance carriers are
provider, “I was paid for the service, so the coding must be looking for ways to recoup
correct.” But that is not always the case: Insurance dollars spent on health care.
companies pay claims every day they should have denied or
suspended for further investigation.
WHAT TRIGGERS AN AUDIT
A retrospective audit is a cost containment mechanism that health plans use to determine whether
overpayment on claims have been made to a particular physician, practitioner, or hospital. In
today’s regulatory environment, it is not if, but when your practice will receive a letter from the
insurance carrier, either asking for medical records or announcing a planned visit to your
practice. There are many innocuous activities that could trigger a “red flag” to a carrier. These
red flags include using the same procedure code consistently—for example, the same level of
service for all evaluation and management claims. Many insurance carriers are concerned with
the constant use of level four and five visits because reimbursement is higher for these services.
Another trigger is the performance of diagnostic procedures in the medical office as “routine.”
For example, if the cardiologist orders a stress test on every new patient, the pattern might draw
attention from the insurance carrier who will investigate claims for medical necessity.
What Auditors Look For
Despite provider fears that the smallest slip-up might land them in deep legal trouble, federal
officials aren’t likely to waste their time on a $100 billing error. Instead, they are most likely to
prosecute cases that involve persistent or routine improper claims despite clear guidance from
authorities and extensive notices to correct that behavior.

Let’s review other areas that might trigger an audit from any insurance carrier.
Inconsistent coding among partners within a group.
Coding high levels of evaluation and management services for a new patient or always
reporting a consultation for every new patient
Upcoding evaluation and management services
Unbundling procedures and services
Improper use of modifiers
Inadequate documentation
Submitting “unspecified” diagnoses consistently
Patient and/or provider complaints
Cases that are prosecuted most often involve suspected fraud for such activities as:
Billing for goods and services not rendered
Billing for phantom patients
Upcoding or billing for more time than the duration of the actual service
Charging Medicare patients more than non-Medicare patients for the same services
Paying kickbacks in exchange for referrals
Misrepresenting non-covered services as covered
Billing for medically unnecessary tests
Misrepresenting the quality of care provided
Double billing
Billing incident to services when the physician is not present
Below are some examples of federal fraud cases that were closed between 2006 and 2009.
1. An allergist was accused of fraud when auditors learned he was billing for different
patients who received allergy shots in one office and his satellite office on the same day
and time.
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2. A medical practice administrator was convicted of Medicare fraud and sentenced to
prison for billing the preparation of allergy serum using 99 units each time the patient
received allergy injections, and in turn received over a million dollars in reimbursement
over several years. The physician pleaded guilty, was sanctioned from the Medicare
program, paid a substantial fine with penalties, and is still practicing today. The practice
was also billing over the allowable amount, and the administrator was threatening
patients with law suits and collections for amounts they did not legally owe. After
numerous complaints from patients, Medicare investigated the allegation and uncovered
many areas of fraud and abuse in the practice.
3. A surgeon who took advice from an Internet list-serv was convicted of Medicare fraud
and was sentenced to 20 years in prison for unbundling surgical procedures. The surgeon
assumed all advice on a list-serv from a certified coder/consultant was correct. The
coder/consultant was not investigated.
4. In Florida, a physician was sentenced to 24 months incarceration and ordered to pay

$727,000 in restitution. For cash payments, the physician signed blank prescriptions and
certificates of medical necessity for patients he never saw. In turn, co-conspirators
submitted claims to Medicare for DME and other items or services that were either not
medically necessary or were not provided to beneficiaries.
5. In Oklahoma, a physician was sentenced to 33 months in prison and ordered to pay

$544,000 in restitution for health care fraud. From January 2000 to May 2005, the
physician billed for dosages of Remicade and Procrit that far exceeded the amount of
those drugs in his inventory.
6. In Florida, a doctor was sentenced to 78 months in prison and ordered to pay $504,000 in
restitution and forfeit an additional $705,000, after a jury found her guilty on all counts of
an 89-count indictment, including 44 charges of health care fraud. The physician, who
practiced dermatology, billed Medicare as if she performed highly complex surgical

closure procedures when she actually performed only simple surgical stitches—or no
procedure at all.
7. A podiatrist was sentenced to 78 months incarceration and ordered to pay $528,000 in

restitution for conspiracy, health care fraud, and false statements. The podiatrist, after
being reinstated to the Medicare program in 2002, billed Medicare for non-covered
routine foot care. Patient charts contained no documentation other than the handwritten
date of service. In 2000, the Department of Justice recommended that the podiatrist be
excluded for failure to repay his Health Educational Assistance Loan. To avoid the
exclusion, the podiatrist submitted a fraudulent provider application to Medicare listing
the owner of his new company as his dying friend, who was also a podiatrist, and began
billing under the false identity.
8. In Michigan, pursuant to his guilty plea, a certified social worker (CSW) was sentenced
to 100 hours of community service and ordered to pay $356,000 in restitution for health
care fraud. Investigation revealed that the CSW billed Medicare and a private insurer for
psychotherapy services that were never rendered.
9. An internist who ran an alcohol and drug clinic was convicted of health care fraud after
submitting false claims for reporting high levels of evaluation and management services
never rendered to Blue Cross Blue Shield patients. After the practitioner was indicted he
fled to Mexico and was later arrested and sentenced to a 20 year prison term.
In all of these cases, a “red flag” triggered an audit investigation. It could have been a patient
complaint, or over utilization of services that prompted an investigation. This is just a small
sample. There are many more cases of fraud and abuse prosecuted on an annual basis. Many
cases are not considered criminal, however. The government might enter into an agreement with
the practitioner to pay fines and penalties as well as recover the overpayment from the provider.
The government typically will offer the practitioner or medical group a “Corporate Integrity
Agreement” (CIA) in which the practitioner or medical group is under federal government
10

scrutiny for several years. A yearly audit is conducted by an uninterested third party approved by
the government. If the practitioner or group has more than a 5 percent error rate as a result of the
audit, other penalties might apply.
Another type of agreement is a Certificate of Compliance Agreement (CCA). CCAs are an

alternative to CIAs for those organizations facing the consequences of alleged compliance
violations. The factors that can be considered by OIG officials when deciding whether to issue a
CCA or a CIA might include:
an assessment of whether the provider itself disclosed its alleged violations
the amount of monetary damage inflicted upon federal health care programs
whether successor liability is involved
whether the organization is still an active participant in government health care
programs, or is still engaged in the same line of business
whether the alleged misconduct could, in fact, be repeated
how far in the past the incident(s) may have occurred
whether an acceptable compliance program is in place, and the willingness of a
provider to certify its compliance, annually, to the OIG
Any other pertinent circumstances
The CCA would be issued only in the aftermath of a violation committed by a provider: The
OIG, in doing so, would be inferring that the rest of an organization’s compliance program is
operating efficiently enough so that a CIA would not be necessary. As a result, federal officials
attempt to be very specific in their requests for documentation from providers who are seeking a
CCA instead of a CIA. The most important materials that the OIG requires are audit reports and
documents that detail an organization’s efforts to follow up and take corrective action when a
violation has occurred. The agency also looks for descriptions of a provider’s efforts to
voluntarily disclose its violations.
Audits of billing practices result from the following four actions:

1. Random sampling: Many insurance carriers, including Medicare, are required to audit
10 percent of its providers randomly on an ongoing basis.
2. Focused Medical Review: An insurance carrier chooses specific CPT codes to review in
post-payment audits. Statistics are run to determine a median number for each of these
codes. A physician who submits those codes in a volume greater than the mean will be
audited.
3. Complaints by staff: The False Claims Act encourages “whistleblowers” to turn in
employers suspected of submitting false claims by offering rewards of 15 percent to 30
percent of the total amount recovered by the government.
4. Patient complaints: Medicare is required by law to investigate all complaints brought by
Medicare beneficiaries. Many insurance carriers respond to patient complaints in the
same manner.
The Insurance Audit
A chart audit is an examination of medical records to determine what procedure or service is performed,
and to determine if the documentation is compliant and correctly coded, and that all charges are captured.
There are countless performance components that can be measured in a chart audit. Insurance carriers
frequently conduct audits (reviewing the practitioner’s medical record documentation) to validate
that the service the practitioner has reported on the claim form is reported correctly and that chart
documentation supports the service billed. Many insurance carriers, including Medicare and
Medicaid, conduct these types of audits routinely. These are prepayment audits, prospective
payment audits, and focused reviews. Insurance companies may employ or contract with
companies to perform these audits. The insurance carrier will contact the medical practice,
typically by letter, to advise the practitioner that an investigation or audit will be conducted. If
the physician is a participating physician in an insurance carrier’s network, he or she agrees by
contract to carrier audits pursuant to the provider agreement.
Even if a physician is not part of the insurance carrier’s network, or is not a network provider, an
audit request made by the insurance carrier can still be valid based on applicable federal and state
laws. Both federal law (HIPAA) and state laws contain stringent requirements as to the written
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authorization required from a patient or authorized person for the release of patient information.
Violation of these requirements could expose the practitioner to civil or criminal liability.
The insurance carrier must provide the appropriate

A physician should always be given
authorization before medical information can be released. the opportunity to review medical
In cases where an insurance company alleges fraudulent records subject to audit prior to a
review.
practices, the insurance carrier could report the physician
to the Office of Professional Medical Conduct in his or her state, resulting in an investigation
that might affect the provider’s medical license. Each state has laws related to public health that
are applicable to any insurance carrier in which a practitioner’s performance—including billing
and utilization patterns—is evaluated. Each state provides safeguards to practitioners and
imposes specific obligations on insurance carriers who conduct audits. It is extremely important
that each provider understand his or her rights based on federal and state laws, as well as the
potential repercussions of a carrier audit.
Many insurance carriers, prior to performing an audit, will send the practitioner a letter
identifying the practitioner as an “outlier.” This is a warning to the practitioner to begin an
internal review of his or her coding practices to ensure, in light of a coding audit from a carrier,
that his or her documentation will withstand scrutiny. If there are errors in coding, this gives the
practitioner ample time to make changes to his or her documentation, to change coding patterns
prior to a carrier audit, to self-disclose coding or billing errors, and to refund overpayments to the
insurance carrier.
An audit or investigation might begin when the carrier requests the original documentary
evidence, which might include the medical record on a specific date of service along with other
supporting documentation. When you have been contacted by the insurance company and
advised it intends to audit the practice, plan and formalize the process for responding to the audit.
You should have a keen awareness that what you provide to the insurance carrier potentially
could be used against you at a later date.

Your initial response and/or contact with the insurance carrier should be as well thought out and
implemented as the insurance carrier’s strategic plan to audit the practitioner. Your response to
the audit or review depends upon the type, scope, and duration of the audit, requires an
evaluation of the insurance carrier’s demand and, in most cases, the assistance of a coding
expert. Some requests for an audit will be in the form of a letter requesting specific medical
records and/or documentation for specific dates of service. You should also include any
supporting documentation such as lab reports, radiology reports, etc., if it will help support the
service provided.
Many insurance auditors will make a site visit to the medical practice. The insurance carrier will
request specific records, typically by patient name and identification number. They will request a
quiet place to work, and access to the medical records. Before you allow an auditor access to
your medical records, check his or her identification and authorization. An audit investigation
might include your practice’s sign-in sheet, superbills or charge tickets, daily appointment
schedule, or other supporting evidence the carrier requests.
Any information provided to the insurance company’s auditor or investigator during the initial
contact will be added to his or her file, log, or note pad and used to compare against information
already received. Some information might come from a patient interview, which typically
confirms types of treatment, duration, and times of appointments. The initial contact should not
be taken lightly. It is crucial to understand the significance of a “formal” approach in responding
to any audit investigation because the insurance carriers rely heavily on data-mining software,
coordination with law enforcement, and potential civil litigation.
The medical practice should assign a point person to be the liaison between the insurance carrier
and the practice. This person should make sure that all requests and office policies for releasing
the information are compliant. Each contact with the insurance carrier—either by phone, e-mail,
or in person—should be well-planned so that any statements made by either party are clear and
documented. The practitioner and his or her staff should understand the scope of the request, and
when in doubt clarify this information with the auditor. He or she should also understand the
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time frame during which the carrier demands records or a site audit, and whether retrieval of the
files and/or information is disruptive to the practice given the insurance carrier’s time
constraints.
If the time frame is not reasonable due to extenuating circumstance, contact the auditor for an
extension to comply with the request. If it will take you more time to produce the information
requested, tell them. By no means should you ignore the request. Every communication with the
insurance carrier regarding the audit, such as timing and scope of review, must be in writing.
It is a good idea to allow the practitioner the opportunity to review the documents if sending the
information to the insurance carrier auditor. It is also good practice to have a coding expert
review the documentation. In most cases, he or she can provide assistance with problems that
might be found. The expert might uncover coding policies the practice is not aware of relative to
the specific claims. The practitioner must not change the documentation. The coding expert is
providing guidance, not a way to come out of the audit without recovered dollars if the coding
does not support the documentation. For example, the coder might advise the practitioner that his
or her handwriting is not legible, and that he or she might want to dictate the notes prior to
sending the records. This is allowed by most insurance carriers (including Medicare) if the
handwriting is in question. The original handwritten notes must be included, however. The
practitioner must also disclose to the insurance carrier that he or she dictated for clarity. To
support medical necessity, the practitioner might also want to send a letter to the auditor
explaining unusual circumstances or difficult procedures or patient conditions, using easy-to-
understand lay language.
RECOVERY AUDITS
There are various types of recovery audits and all carriers, including government payers, audit
medical records to ensure the reimbursement for medical services meets coding guidelines,
applicable policies and procedures, as well as medical necessity for the service provided.

The Retrospective Audit
It is vital that the practitioner bill
evaluation and management
A recovery audit is a post-payment review
services based on the medical
performed retrospectively. This audit is an analysis complexity of the patient and
of the provider’s documentation and other report each service case by case,
based on documentation and
supporting information to support its payment to
medical necessity for the service
the provider. The audit is designed to identify
overpayments. Though some attempts to recoup
overpayments may be appropriate, such as when honest mistakes are made, retrospective audits
are burdensome and add an administrative expense to the practice.
If an insurance carrier determines through a retrospective audit that overpayments have been
made for procedures and services because documentation does not support the charges
submitted, the practitioner might be asked to make repayment for procedures already provided,
or unwillingly accept automatic reduction of future payments. This practice has become more
widespread the past several years.
The initial stage of a retrospective audit is typically conducted without providing notice to the
practitioner. If the insurance carrier determines (based on its own medical payment policies) that
an overpayment(s) was made, the insurance carrier will notify the practitioner in writing. Such
notices should be dealt with immediately. These notices should include the reason for the
suspected overpayment(s), such as:
Compliance with coding requirements for evaluation and management services,
Surgical procedures and modifiers
Documentation requirements
Medical necessity supported by the diagnosis code
If the insurance carrier disputes medical necessity or eligibility for reimbursement of procedures
or services, the insurance carrier might request additional information, such as medical record
documentation, to assist in making a determination.
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A health plan might elect to perform what is typically referred to as a “focused medical review,”
or an in-depth look at a specific area of the practitioners coding or billing practices. Typically,
this type of review requires the insurance carrier to use national statistics to identify a medical
practice with high numbers of expensive procedures. When performing a focused review, the
insurance carrier typically requests a significant sample of medical records (more than 20) and
most likely is targeting a specific area, such as:
High Volume of services: Overutilization or frequency of services that may be identified

by specialty, size of practice, patient population, or other factors that affect a
practitioner’s billing practice.
Coding: High-level evaluation and management services are consistently on the

insurance carrier’s radar. Because patient encounters vary in complexity, insurance
carriers expect service levels will vary as well. Practitioners who consistently bill higher
levels of service will more likely be audited. The insurance carrier takes into account the
patient population and specialty when making this determination. Utilization patterns will
be identified and, if the practitioner is an “outlier” (meaning that he or she reports higher
levels of service than other providers within the same specialty and specific region), in all
likelihood documentation will be requested.
Misuse of Modifiers: Overuse of modifiers 25 and 59, for instance, might trigger a
retrospective audit from an insurance carrier. A high reporting volume of evaluation and
management service with modifier 25 appended will, in many cases, alert the carrier that
an audit is indicated to review the documentation and determine whether additionally
reported services were above and beyond the service performed during the visit, based on
the insurance carrier’s medical payment policy.
Modifier 59 has been slated by the Office of the Inspector General, the Centers for
Medicare & Medicaid Services, and the American Medical Association as the “Modifier

of last resort.” This modifier should only be used when a procedure or service is normally
bundled but the service, in the particular instance, is separate and distinct from the
primary procedure performed. This modifier is often misused and should only be reported
if the procedure is a National Correct Coding Initiative edit and the modifier is allowed to
bypass the edit, when all criteria is met. Unbundling refers to the duplicative coding of
services or procedures that a provider submits as being performed on the same day.
Payers consider even unintentional unbundling to be a form of fraudulent or reckless
billing.
This information may be obtained at:

Modifier 25: http://www.oig.hhs.gov/oei/reports/oei-07-03-00470.pdf
Modifier 59: http://www.oig.hhs.gov/oei/reports/oei-03-02-00771.pdf
Other reasons: A practitioner might be selected for a retrospective audit for various
additional reasons, including previous noncompliance with insurance carrier policies.
Government Audits
The Medicare fee for service program consists of a number of payment systems, with a network
of contractors who process more than 1.2 billion claims each year submitted by over 1 million
providers of health care services. Contractors process claims, make payments to health care
providers in accordance to Medicare regulations, and educate provides on how to accurately
submit claims that meet medical necessity guidelines. Medicare claims contractors (because of
the large volume of claims they receive) pay most claims without initially scrutinizing the
medical records associated with the services submitted for payment.
The Centers for Medicare & Medicaid Services (CMS) conducts audits frequently to ensure
compliance with coding guidelines, and local and national carrier determination(s) and coverage
issues. The two most common types of audits are the Comprehensive Error Rate Testing
Program (CERT) and the Recovery Audit Contractors (RAC). The CMS contractor also may
audit based on utilization patterns or other identified coding and billing patterns of a practitioner.
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Comprehensive Error Rate Testing Program (CERT)
The primary goal of each contractor is to “Pay it Right”—to pay the right amount to the right
provider for covered and correctly coded services. Budget constraints limit the number of claim
reviews these contractors can conduct; thus, they must choose carefully which claims to review.
To improve provider compliance, contractors must also determine how best to educate providers
about Medicare rules and implement the most effective methods for accurately answering
coverage and coding questions.
As part of its Improper Payments Information Act (IPIA) compliance efforts, and to help all
Medicare FFS Contractors better focus review and education, CMS has established the
Comprehensive Error Rate Testing (CERT) program and Hospital Payment Monitoring Program
(HPMP) to sample and review randomly claims submitted to Medicare.
CMS uses several types of contractors to prevent improper payments for Medicare claims and
admissions, including:
Medicare Administrative Contractors (MACs)
Contractor (carriers)
Durable Medical Equipment Regional Carriers (DMERCs)
Fiscal Intermediaries (FIs)
Quality Improvement Organizations (QIOs)
Both programs (CERT and HPMP) are designed to be a measurement of improper payments.
Any claim that was paid when it should not have been is an improper payment. This includes
claims that may have been fraudulent. Neither program, however, can be considered a measure
of fraud. Because both programs use random samples to select claims, reviewers are often unable
to see provider billing patterns that indicate potential fraud when making payment
determinations.

The CERT program does not, and cannot, label a claim fraudulent; however, one scenario of
potential fraud that the CERT program is able to identify occurs when the CERT documentation
contractor is unable to locate a provider or supplier when requesting medical record
documentation. This lack of provider or supplier response results in no documentation errors.
The Department of Health and Human Services (HHS) and the Office of the Inspector General
(OIG) produced Medicare FFS error rates from 1996-2002. The OIG designed a sampling
method that estimated only a national dollar weighted fee for service (FFS) paid claims error
rate. Beginning in 2003, CMS elected to calculate a provider compliance error rate in addition to
the paid claims error rate. The provider compliance error rate measures how well providers
prepare Medicare FFS claims for submission.
CMS calculates the Medicare Fee-For-Service error rate and estimate of improper claim
payments using a methodology the OIG approved. The CERT methodology includes:
Randomly selecting a sample of approximately 120,000 submitted claims
Requesting medical records from providers who submitted the claims
Reviewing the claims and medical records for compliance with Medicare coverage,
coding, and billing rules
In 2004 the national gross paid claims error rate was 10.1percent. A portion of this error rate was
due to practitioners not sending requested supporting documentation to the CERT contractor.
Practitioners who fail to submit documentation to the CERT contractor receive a demand letter
requesting a refund of payments received for what CMS considers an “erroneous” claim.
In 2008, the CERT program used the following methodology:

CERT randomly selecting a sample of 129,875 claims submitted to
Carriers/DMERCs/FIs during the reporting period
HPMP randomly selecting a sample of 39,841 acute care inpatient hospital discharges
Requested medical records from the health care providers based on submitted claims
by provider to be included in the sample
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Where medical records were submitted by the provider, reviewing the claims in the
sample and the associated medical records to see if the claims complied with
Medicare coverage, coding, and billing rules, and, if not, assigning errors to the
claims
Where medical records were not submitted by the provider, classifying the case as a
no documentation claim and counting it as an error
Sending providers overpayment letters/notices or making adjustments for claims
that were overpaid or underpaid


Types of Claims/Admissions Reviewed By CERT and HPMP
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Both programs are designed to be a measurement of improper payments. Any claim is paid when
it should not have been is considered an improper payment. This includes claims that may have
been fraudulent. By May 2008 the error rate has declined significantly from 2004, from 10.1
percent to an overall 3.7 percent.

2008 Error
Rate
(Overpayments +
Overpayments Underpayments Underpayments)
Type of Total Dollars Improper Error

Contractor Paid Payment Rate Payment Rate Payments Rates
Carrier $74.9B $3.2B 4.2% $0.2B 0.3% $3.4B 4.5%
DMERC $9.9B $0.9B 8.9% $0B 0.1% $0.9B 9.0%
FI $89.4B $1.2B 1.3% $0.1B 0.2% $1.3B 1.5%
QIOs $102B $4B 4.0% $0.5B 0.5% $4.6B 4.5%
All Medicare
FFS $276.2B $9.3B 3.4% $0.9B 0.3% $10.2B 3.7%

CERT Samples
Sampling and Medical Records requested totaled 129,875 claims for 2008 from CMS contractors
(carriers), DMERCs, FIs, and MACs. The CERT contractor was assigned to select randomly
approximately 172 claims each month from each CMS Contractor. Each claim was a “blind”
electronic sample of claims that providers submitted that day. Then, the CERT contractor
requested the medical record from the practitioner associated with the sample claim. A written
request for the medical record allowing 30 days to provide the information was sent to each
practitioner sampled. If the documentation was not received within 30 days, the contractor was
instructed to send three subsequent letters and to follow up with phone calls. For the sample to be

considered a “no documentation” claim, the CERT contractor allowed 75 days to receive the late
documentation. If the CERT contractor received the documentation within the 75 day period, the
documentation was included in the report and the error rate was adjusted. If the CERT contractor
received no documentation, it was counted under the “No documentation error.”
What Does the CERT Contractors Do with the Claims?
When the CERT contractor receives the requested documentation, a review of the claim is
conducted to identify coding errors, medical necessity errors, etc., and to identify improper
payments. The Common Working File is reviewed to identify beneficiary eligibility and to see if
no other insurance carrier is responsible for paying the claim. Medicare regulations, National
Coverage Determinations (NCDs), Local Coverage Determination (LCDs), and carrier manuals
are reviewed, along with CMS articles, when performing the review. In 2008, any successful
appealed claim was entered into an appeals tracking system prior to the production of the error
rates.
CERT Outcomes
Contractors are notified of detected provider overpayments so they can request refunds from the
provider. Contractors are notified of underpayments also, but they are not currently required to
make payments to providers for underpayments identified in the CERT program. The contractors
are encouraged to correct the underpayments, however. Providers have the right to appeal
denials, including “no documentation” denials, using the Medicare claims appeal process by
submitting the appropriate paperwork and the supporting documentation to validate his or her
claim.
In 2008, the CERT program identified $875,005 in actual overpayments and has collected to date
$650, 418 of these overpayments. All overpayments have not been collected because:
The provider has gone out of business, or;
The provider appealed the overpayment and overturned the CERT decision
24

Purpose of Error Rate Findings
CMS uses the error rate findings to determine underlying reasons for claim errors and to adjust
the CMS action plans to improve compliance in:
Coding
Documentation
Provider billing practices
Payment
Tracking and reporting error rates can help CMS to identify emerging trends and to implement
corrective action to manage all Medicare fee for service contractors’ performance. Error rates
will provide the contractors with additional guidance to direct claim review activity (audits),
provider education, and data analysis. This information is also useful to assist with adjustment of
the contractors’ error rate reduction plans.
The national error rate by year illustrates underpayments and overpayments, including the total
dollars paid and percentage rate of improper payments. The error rate of 14.2 percent in 1996
was reduced to 6.4 percent in 2003, escalated in 2004, and has steadily declined since that time.

National Error Rates by Year
Year Total Dollars Overpayments Underpayments Overpayments +

Paid Underpayments
Payment Rate Payment Rate Improper Payments Rate
1996 $168.1 B $23.5B 14.0% $0.3 B 0.2% $23.8 B 14.2%
1997 $177.9 B $20.6B 11.6% $0.3 B 0.2% $20.9 B 11.8%
1998 $177.0 B $13.8B 7.8% $1.2 B 0.6% $14.9 B 8.4%
1999 $168.9 B $14.0B 8.3% $0.5 B 0.3% $14.5 B 8.6%
2000 $174.6 B $14.1B 8.1% $2.3 B 1.3% $16.4 B 9.4%
2001 $191.3 B $14.4B 7.5% $2.4 B 1.3% $16.8 B 8.8%
2002 $212.8 B $15.2B 7.1% $1.9 B 0.9% $17.1 B 8.0%
2003 $199.1 B $20.5B 10.3% $0.9 B 0.5% $12.7 B 6.4%
2004 $213.5 B $20.8B 9.7% $0.9 B 0.4% $21.7 B 10.1%
2005 $234.1 B $11.2 B 4.8% $0.9 B 0.4% $12.1 B 5.2%
2006 $246.8 B $9.8 B 4.0% $1.0 B 0.4% $10.8 B 4.4%
2007 $276.2 B $9.8 B 3.6% $1.0 B 0.4% $10.8 B 3.9%
May $276.2 B $9.3 B 3.4% $0.9 B 0.3% $10.2 B 3.7%
2008

26

This illustration summarizes the percent of the total dollars improperly allowed by the error
category from 1996 through the last CERT audit in May 2008.
Summary of Error Rates by Category
May
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Type Of Error Net Net Net Net Net Net Net Net Gross Gross Gross Gross Gross
No
Documentatio
n Errors 1.9% 2.1% 0.4% 0.6% 1.2% 0.8% 0.5% 5.4% 3.1% 0.7% 0.6% 0.6% 0.3%
Insufficient
Documentatio
n Errors 4.5% 2.9% 0.8% 2.6% 1.3% 1.9% 1.3% 2.5% 4.1% 1.1% 0.6% 0.4% 0.5%
Medically
Unnecessary
Errors 5.1% 4.2% 3.9% 2.6% 2.9% 2.7% 3.6% 1.1% 1.6% 1.6% 1.4% 1.3% 1.3%
Incorrect
Coding Errors 1.2% 1.7% 1.3% 1.3% 1.0% 1.1% 0.9% 0.7% 1.2% 1.5% 1.6% 1.5% 1.4%
Other Errors 1.1% 0.5% 0.7% 0.9% 0.4% -0.2% 0.0% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2%
IMPROPER
PAYMENTS 13.8% 11.4% 7.1% 8.0% 6.8% 6.3% 6.3% 9.8% 10.1% 5.2% 4.4% 3.9% 3.7%
CORRECT
PAYMENTS 86.2% 88.6% 92.9% 92.0% 93.2% 93.7% 93.7% 90.2% 89.9% 94.8% 95.6% 96.1% 96.3%

The following illustrate the paid claim error rates and projected improper payments by contractor
type.
Paid Claims Error Rates by Contractor Type
28

The top twenty (20) coding errors were identified for 2008. Most of the top coding errors involve
evaluation and management services.
Top 20 Services with Incorrect Coding Errors
Incorrect Coding Errors
Carriers (HCPCS), DMERCs (HCPCS), FIs (Type of Bill), and Paid Claims Projected Improper 95% Confidence
QIOs (DRG) Error Rate Payments Interval
Office/outpatient visit, est (99214) 5.5% $244,047,384 5.0% - 6.1%
SNF-inpatient (including Part A) (21) 1.1% $231,568,336 0.5% - 1.6%
Subsequent hospital care (99233) 16.8% $220,483,945 14.7% - 18.9%
Hospital-outpatient (HHA-A also)(under OPPS 13X must be used

for ASC claims submitted for OPPS payment -- eff. 7/00) (13) 0.6% $149,077,042 0.4% - 0.8%
Office consultation (99244) 17.5% $120,385,360 14.2% - 20.8%
Initial hospital care (99223) 12.7% $106,820,039 10.0% - 15.4%
Inpatient consultation (99254) 15.5% $106,671,540 12.8% - 18.3%
Subsequent hospital care (99232) 3.5% $91,410,988 2.8% - 4.3%
Inpatient consultation (99255) 17.7% $75,543,920 13.1% - 22.3%
Office/outpatient visit, new (99204) 20.8% $66,046,693 16.8% - 24.8%
Emergency dept visit (99285) 5.4% $47,404,916 3.9% - 6.9%
HHA-inpatient or home health visits (Part B only) (32) 0.5% $44,834,494 0.2% - 0.8%
Office/outpatient visit, new (99203) 10.4% $42,348,998 7.9% - 12.9%
PERM CAR PACER IMPL W MAJ CV DX/AICD LEAD/GNRTR

(551) 4.5% $41,428,669 ( 0.1%) - 9.0%

ECMO/TRAH W MV 96+ HR/PDX EXC FCE MTH & NCK W
MAJ OR (541) 1.3% $38,134,963 ( 1.2%) - 3.8%
EXT OR PROC UNREL TO PRINC DIAG (468) 3.1% $37,800,101 1.1% - 5.1%
Overall 1.4% $3,866,320,182 1.3% - 1.5%
30

This next illustration identifies the types of services which were paid improperly along with the
paid claims error rate.
Top 20 Service Types with Highest Improper Payments: Carriers and MACs
Type of Error
Paid
Service Type Billed Projected Claims 95% Medically
to Carriers Improper Error Confidence No Insufficient Unnecessary Incorrect
(BETOS codes) Payment Rate Interval Documentation Documentation Services Coding Other
Office visits -
established $622,528,034 6.0% 5.6% - 6.4% 4.4% 14.8% 1.2% 79.4% 0.3%
Hospital visit - 10.9% -

subsequent $602,033,573 12.2% 13.5% 9.2% 33.8% 0.1% 55.2% 1.7%
15.1% -
Consultations $516,912,824 16.6% 18.2% 3.0% 10.2% 0.0% 86.4% 0.4%
All Other Codes $346,805,535 1.2% 1.0% - 1.4% 23.1% 43.7% 5.2% 23.5% 4.4%
Hospital visit - 14.7% -

initial $211,886,063 17.6% 20.6% 1.1% 25.7% 0.0% 68.7% 4.5%
Minor procedures -
other (Medicare fee
schedule) $172,040,758 6.9% 5.3% - 8.4% 4.7% 68.4% 11.5% 10.6% 4.8%
11.3% -
Nursing home visit $159,919,505 14.2% 17.2% 10.1% 17.4% 0.8% 71.7% 0.0%
13.2% -
Office visits - new $156,017,076 15.5% 17.7% 1.2% 8.0% 0.0% 90.8% 0.0%
Ambulance $85,194,498 2.2% 1.2% - 3.1% 17.6% 26.8% 39.9% 14.9% 0.9%
Emergency room
visit $80,316,367 5.3% 4.0% - 6.6% 9.4% 5.3% 0.0% 85.3% 0.0%
Standard imaging - ( 0.6%) -

nuclear medicine $56,886,773 3.1% 6.8% 61.1% 7.5% 6.6% 24.8% 0.0%
Ambulatory
procedures - other $56,649,382 7.6% 0.0% - 15.3% 74.1% 8.2% 0.9% 16.3% 0.5%
Chiropractic $55,126,448 10.2% 7.9% - 12.6% 2.4% 56.3% 23.8% 16.5% 1.1%

Eye procedure - ( 4.5%) -
other $37,708,628 6.8% 18.1% 0.0% 100.0% 0.0% 0.0% 0.0%
Hospital visit -
critical care $36,045,736 5.0% 2.0% - 8.0% 4.4% 33.6% 0.0% 62.0% 0.0%
Other tests - other $31,878,027 2.7% 1.1% - 4.3% 29.6% 52.5% 0.1% 14.9% 2.8%
Other drugs $31,758,233 0.6% 0.1% - 1.2% 57.6% 15.3% 1.2% 25.8% 0.0%
Lab tests - other

(non-Medicare fee
schedule) $30,070,017 1.4% 0.7% - 2.2% 11.9% 38.7% 13.5% 30.8% 5.0%
Dialysis services
(Non MFS) $28,735,555 4.9% 1.6% - 8.3% 29.5% 40.6% 0.0% 29.8% 0.0%
Echography - heart $25,197,633 1.8% 0.3% - 3.3% 47.7% 52.1% 0.1% 0.0% 0.0%
Oncology - radiation ( 0.5%) -

therapy $22,698,932 1.6% 3.7% 1.8% 98.2% 0.0% 0.0% 0.0%
All Type of
Services (Incl.
Codes Not Listed) $3,366,409,599 4.5% 4.2% - 4.8% 10.7% 27.0% 3.1% 57.7% 1.5%
32

If your practice or organization receives a letter from CERT with a request for medical record
documentation, you should respond promptly by submitting the documented requested in the
specified time. Practitioners do not need to obtain beneficiary authorization to forward medical
record documentation to the CERT contractor.
Recovery Audit Contractors (RAC)
Section 306 of the Medicare Prescription Drug Improvement and Modernization Act of 2003
(MMA) paved the way for the Department of Health and Human Services (HHS) to conduct a
three-year demonstration program to identify and correct Medicare overpayments and
underpayments. The RAC demonstration program was conducted in Florida, California, and
New York. The RAC demonstration was an important tool in helping CMS to prepare for the
permanent RAC program, which was suspended in 2008 and reinstated in February 2009. The
RAC demonstration program proved to be successful in returning dollars to the Medicare Trust
Funds and identifying monies that need to be returned to providers. It has provided CMS with a
new mechanism for detecting improper payments made in the past, and has also given CMS a
valuable new tool for preventing future payments. Section 302 of the Tax Relief and Health Care
Act of 2006 makes the RAC Program permanent, and requires the Secretary of Health and
Human Service to expand the program to all 50 states by no later than 2010.
Overview of Concerns from the Office of Management and Budget (OMB)
According to a January 2008 report by the OMB, Medicare alone estimated $10.8 billion in
improper payments in 2007. With the advent of the Obama stimulus package and increasing
expenditures, along with the growing Medicare beneficiary population, the government has
taking a proactive approach to safeguard the Medicare Program. CMS, which operates the
Medicare program, has a long history of calculating improper payment estimates and developing
strategies to protect the Medicare program’s fiscal integrity. The CERT program, implemented in
2003, began producing error rates and estimates of improper payments to evaluate the CMS
contractors and program performance. CMS uses the error rate data to identify problems that

exist and target improvement efforts. The cornerstone of these efforts is the Error Rate Reduction
Plan (ERRP), which identifies strategies to clarify CMS policies and implement new initiatives
to reduce improper payments.
The Improper Medicare FFS Payments Report for November 2007 estimates that 3.9 percent of
the Medicare dollars paid did not comply with one or more Medicare coverage, coding, billing,
or payment rules. This equates to $10.8 billion in Medicare FFS overpayments and
underpayments.
34

RACs Identified and Corrected $371 Million Dollars
of Medicare Improper Payments during FY 2007
Most improper payments occur when providers submit claims that don’t comply with Medicare
coding rules or medical necessity guidelines. Over 96 percent of these improper payments were
overpayments collected from providers; the remaining 4 percent were underpayments repaid to
providers. Two factors explain why only 4 percent of the improper payments identified were
underpayments. First, although all three RACs have years of experience working in the private
industry identifying overpayments, none of them had experience identifying underpayments
before the RAC program. Each RAC had to build the algorithm software to seek out these
underpaid claims. Second, a lower percentage of underpayment identifications is expected,
according to the Improper Medicare FFS Payments Report, which estimated that only 9 percent
of Medicare improper payments were underpayments.
Summary of Total Improper Payments Corrected By the RAC Program – FY 2007

Overpayments Underpayments Total Improper
Collected6 Repaid7 Payments Corrected
New York $ 112.5 m + $ 1.8 m = $ 114.3 m
Florida $ 124.6 m + $ 4.1 m = $ 128.7 m
California $ 120.1 m + $ 8.4 m = $ 128.5 m
Total $ 357.2 m + $ 14 .3 m = $ 371.5 m
During 2007, the RACs returned a significant amount of improper payments to the Medicare
Trust Funds. Only 5 percent of RAC determinations were overturned by appeal. In comparison,
as of August 31, 2008 a cumulative total of 7.6 percent of all Part A and Park B claims were
overturned by appeal. Overall, the RACs determined that 525,333 claims were overpaid.
Providers appealed 118,051 of these overpayment determinations, and 40,115—34 percent—
were overturned in favor of the provider as of August 31, 2008. During the RAC demonstration,
the auditors reviewed claims based on accepted standards of medical practice, CMS medical
policies, and National and Local coverage determinations (NCDs and LCDs).

RACs succeeded in correcting more than $1.03 billion of Medicare improper payments.
Approximately 96 percent of these improper payments were overpayments collected from
providers, while the remaining 4 percent were underpayments repaid to providers.
Improper Payments Corrected by the RAC Demonstration

Cumulative through 3/27/08, Both Claim RACs
and MSP RACs (Million Dollars)
RAC Overpayments Underpayments Repaid Total Improper Payments

Collected Corrected
Connolly $266.1 $4.3 $270.4
HDI $396.1 $20.8 $416.9
PRG $317.8 $12.7 $330.5
Claim RAC Subtotal $980.0 $37.8 $1,017.8
HMS $1.3 $0.0 $1.3
DCS $11.4 $0.0 $11.4
MSP RAC Subtotal $12.7 $0.0 $12.7 $
Grand Total $992.7 $37.8 1,030.5
Source: For Claim RACs, RAC invoice files and RAC Data Warehouse. For MSP RACs, Treasury Deposit Slips.
Future improper payments can be avoided by analyzing the RACs’ service-specific findings.
CMS can use this information to implement more provider education and outreach activities, or
to establish new system edits with the goal of preventing future improper payments. Hospitals
and other health care providers can use this information to help ensure that they are submitting
correctly-coded claims for services that meet Medicare’s coding and medical necessity policies.
From the inception of the RAC demonstration through June 30, 2008, providers chose to appeal
only 19.6 percent (102,705) of the RAC determinations. Overall, the data indicate that of all the
RAC overpayments determinations (525,133), only 6.8 percent (35,819) were overturned on
appeal.
36

Before the demonstration ended in March, the RACs speeded up their process and requested
large numbers of records in December 2007, which resulted in huge take backs in the months of
January and February, 2008. For many hospitals, the take back in these two months accounted
for 90 percent of the money taken back. The updated totals report was released in a July 11, 2008
Evaluation report from CMS to Congress, and identified $1.03 billion in improper Medicare
payments for the demonstration (March 2005 to March 2008). The full report may be referenced
at: http://www.cms.hhs.gov/RAC/Downloads/Appealupdatethrough63008ofRACEvalRept.pdf.

Much like the Medicare claims processing contractors, the RACs use medical personnel, such as
nurses and therapists, to review claims for medical necessity. In addition, each RAC utilized a
physician Medical Director to oversee the medical record review process, assist nurses,
therapists, and certified coders upon request during complex review, manage the quality
assurance procedures, and inform provider associations about the RAC demonstration.
The two review processes the RACS use are:

automated review
complex review
An automated review is where the claims contained clearly-identifiable errors without review of
the medical records. The RACs used information systems to identify claims errors. Providers
were contacted to pay the overpayment amounts, or underpayment amounts were paid.
For example, a RAC could use information systems to search for claims for two or more
identical surgical procedures for the same beneficiary on the same day at the same hospital. The
duplicate surgical procedures are clearly not medically necessary, should not have been billed
twice by the hospital, and should not have been paid twice by the Medicare claims processing
contractor. The RAC could perform automated review only when the improper payment was
obvious (e.g. a duplicate claim) or a written Medicare policy, Medicare article, or Medicare-
sanctioned coding guideline (e.g., CPT guidelines, CPT Assistant and/or Coding Clinic guidance,
etc.) existed and precisely described the coverage conditions.

Example: HCPCS Level II code J2505 Injection, pegfilgrastim, 6 mg (Neulasta)—The provider
billed one service per 1 mg, but the definition of this code is one service per 6 mg. The provider
administered 6 mgs of Neulasta to the beneficiary but billed for six units of J2505. According to
the definition of the code, six units of J2505 would equal 36 mg of Neulasta.
Example: Outpatient Hospital Speech Therapy—The outpatient hospital billed for each 15
minutes of therapy. The code definition specifies that the code is per session, not per 15 minutes.
The units billed exceeded the approved number of sessions per day. The RAC determined that
the excessive services billed were MEDICALLY UNNECESSARY and issued a repayment
request letter for the payment amount for the unnecessary services. These errors were identified
by the RAC using data mining during the automated review.
A complex review is the review of the medical record in which claims likely contained errors.
Based on the medical record documentation, the RAC auditor could determine whether the claim
was paid correctly or whether an overpayment or underpayment existed.
From the inception of the demonstration through March 27, 2008, CMS provided each RAC with
claims data from 2001 through 2007 for its jurisdiction (which accounted for an estimated total
value of $317 billion). Some RACs focused their reviews on inpatient claims. Others targeted
physician claims. CMS did not specify which claim types a RAC must review. It was up to each
RAC to identify the claims most likely to contain an improper payment.
For the demonstration, the RACs:
Reviewed all claims to identify overpayments and underpayments that can be detected
without medical record review, using their proprietary automated review software
algorithms.
Conducted medical record reviews of claims that the RAC thought—based on
OIG/GAO/CERT reports, their knowledge of the health care industry, etc.—were
likely to contain improper payments.
38

The audits entailed requesting medical records from the health care provider that submitted the
claim. Though not required by CMS, some RACs developed self-imposed limits on the number
of medical records they would request from a given provider over a 30 or 45-day period. Each
RAC attempted to target these reviews to the greatest extent possible to minimize the burden on
the provider and maximize the RAC’s return on investment. The RACS notified providers and
directed the Medicare claims processing contractors to make adjustments for claims that were
either overpayments or underpayments. During the demonstration project—and continuing with
the permanent RAC inception—the RAC auditors are paid based on a contingency fee (dollars
recovered). The permanent program, however, will require the RACs to return contingency fees
if the claim is overturned on appeal.
During the demonstration project certain claims were excluded from review. They included:
Incorrect levels of evaluation and management services—however, RACs could review
E/M services for duplicate payments, violation of global surgery rules, type of service,
etc.
Hospice and home health services
Payments made to providers under a CMS demonstration
Claims previously reviewed by another Medicate contractor
Claims involving a potential fraud investigation
CMS has posted a FAQ section on the RAC’s on their Web site. The following Q&A regarding
RAC review of E/M services was posted on 11/25/2008:
Question:
“Will the Recovery Audit Contractors (RAC) review evaluation and management (E&M)
services on physician claims under Part B?”
Answer:
Yes, the review of all evaluation and management (E & M) services will be allowed under the
RAC program. The review of duplicate claims or E & M services that should be included in a

global surgery were available for review during the RAC demonstration and will continue to be
available for review. The review of the level of the visit of some E & M services was not
included in the RAC demonstration. CMS will work closely with the American Medical
Association and the physician community prior to any reviews being completed regarding the
level of the visit and will provide notice to the physician community before the RACs are
allowed to begin reviews of evaluation and management (E & M) services and the level of the
visit.
RACs will be able to review claims up to three years past the date of the initial payment. The
Contractors responsible for the independent audits are compensated on a contingency fee basis
determined by the principal collection amount or the amount paid back to the provider.
What happens if a provider appeals and wins? Under the demonstration project, RACs were
entitled to keep their contingency fees if a denial was upheld at the first stage of appeal,
regardless of whether a provider won subsequent appeals. Claims submitted prior to October 1,
2007 may be reviewed according to the most recent Scope of Work released 11/07/08. This
information can be referenced at:
https://www.fbo.gov/index?s=opportunity&mode=form&id=5c8c7d4b00249ba579d4d77d64bd0
aea&tab=core&_cview=1.
Because they are incentivized to find errors, RACs to date have been extremely aggressive in
their review and denial of claims. Forty percent of alleged overpayments identified during the
demonstration program were denied for medical necessity reasons. To further sweeten the
incentive for future findings, RAC auditors were paid $187.2 million in contingency payments
during the demonstration project. Fees paid to these auditors range from 9 to 12 percent of the
overpayments they uncover.
40

Review the illustration of RAC errors by provider type.

Now review the RAC errors identified by error type
The Permanent RAC Program
The RAC programs will be implemented in stages throughout the country over several months.
Section 302 of the Tax Relief and Health Care Act of 1996 (TRHCA) requires full
implementation no later than January 1, 2010. CMS is implementing the RAC permanent
program gradually, and it will ultimately affect every provider in every state.
RACs will use their own proprietary software, experiences, and resources, as well as the CMS
complex medical review process, to identify overpayments and underpayments. The medical
review process may entail on-site visits or requests for medical records by the claims review
RAC. RACs will apply National and Local Coverage Determinations in the claims review
process. The RACs are authorized to recover claims overpayments and will be referring
underpayments to the fiscal intermediary or carrier for processing and payment to the provider.
All RACs must have a medical director to oversee the recovery process under the permanent
program.
Review the updated RAC Phase-in Schedule. The first phase began in March 2009 and will
cover various states with the second phase to begin in August of 2009.
42

RAC Schedule

Preparing for a RAC Audit
Make sure you understand the target areas for audit. Your practice may be selected for review
through the Medicare data mining process. Medicare will compare your practice coding and
claims data based on a distribution of the national or state statistics. If your medical practice is
outside the normal coding or billing patterns, you may be selected for review. Your first step is
to review the distribution of your procedures and services with state and national statistics and
take a closer look through an internal audit process. E/M services are the most frequently audited
procedures for most practitioners. Some providers have been hit very hard with initial recoveries,
adding up to hundreds of thousands of dollars.
Although there may be a good reason why your practice is reporting level four and five services
consistently, it will not stop CMS from taking a closer look. Your utilization reports should help
guide you as to what areas to focus on internally to review documentation before the RAC
requests medical records. This should be a routine exercise in your practice. However, too many
medical practices fail to recognize the importance of this process and fail to monitor their E/M
distribution and are caught off guard when an insurance carrier audits. It is also wise to monitor
any office procedure, along with modifiers and surgical procedures, performed by your
practitioners. If your finding based on an internal audit are the result of overcoding based on the
documentation, you must be prepared to self disclose the overpayments and refund the amount to
the carrier.
If a RAC audit identifies a specific overpayment amount in the selected sample after reviewing
your medical records, and then extrapolates that amount for all claims submitted for the time
frame under review, the cost could be enormous. For example if the average overpayment of
your claims audited in your practice amounts to $25.00 per claim, and claims were submitted for
10,000 Medicare patients, the overpayment amount of $250,000 plus interest of 11.124 percent
on any unpaid balance calculated from the thirty first day after notification (42CFR405.378)
must be refunded, even though an appeal may be warranted. This means Medicare will recover
reimbursement before the appeals process has begun. And, Medicare is entitled to keep the fund
44

for the 180 days you have to appeal, plus an additional 60 days during which Medicare may
prepare its response. This could result in a loss of significant revenue to the medical practice.
If you are audited by the RAC, you must be prepared to appeal if the documentation for any
procedure and service targeted can be defended. In the instance of a dispute, providers have the
right to discuss findings with RAC representatives and to appeal the RAC’s findings to the
Medicare Audit Contractor (carrier, fiscal intermediary, or durable medical equipment regional
carrier). The current CMS administrative appeal rights remain unchanged. It is also a good idea
to obtain guidance from an attorney experienced in health care law prior to the appeal. An
attorney can be an excellent resource to ensure that all rules and regulations have been followed
and to identify any areas of concern or areas in which the provider might be able to win the
appeal.
There is a potential for significant repayments to the Recovery Audit Contractors, and it is
important for all providers to be prepared. To begin with, health care organizations should
confirm that there are adequate processes in place to respond to demand letters, requests for
medical records, and on-site medical record reviews received from the RACs.
It is also recommended that a point person be designated to manage the process, because it is
unknown where the initial demand letters may be mailed. There are still a number of unknown
variables—which means that health care entities must be prepared for anything and everything.
The Center for Medicare and Medicaid Services has resources available at the following Web
sites for additional information: http://www.cms.hhs.gov.
Each RAC will be responsible for identifying overpayment and underpayments in approximately
one-fourth of the country. The new RAC jurisdictions match the DME MAC jurisdictions. It is
important to know where your jurisdiction is and what RAC will handle you specific state. As of
February 4, 2009, the stop work order was lifted and CMS is continuing with the RAC program

The national permanent RACs are:
Diversified Collection Services, Inc. of Livermore, California, in Region A, initially
working in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and New
York.
CGI Technologies and Solutions, Inc. of Fairfax, Virginia, in Region B, initially
working in Michigan, Indiana, and Minnesota.
Connolly Consulting Associates, Inc. of Wilton, Connecticut, in Region C, initially
working in South Carolina, Florida, Colorado, and New Mexico.
Health Data Insights, Inc. of Las Vegas, Nevada, in Region D, initially working in
Montana, Wyoming, North Dakota, South Dakota, Utah, and Arizona.
The four RACs will contract with subcontractors to supplement their efforts. PRG-Schultz, Inc.
will serve as a subcontractor to Health Data Insights, Inc, Diversified Collects Services, Inc. and
CGI Technologies and Solutions, Inc. in regions A, B and D. Viant Payment Systems, Inc. will
serve as a subcontractor to Connolly Consulting in region C. Each subcontractor has negotiated
different responsibilities in each region, including some claim review.
The number of medical records selected for a RAC audit

might depend on the size of the medical practice or Make sure the documentation
organization. Under the RAC permanent program, there is a submitted is complete and
limit of medical records that may be requested based on legible. Keep in mind that a
type and size of practice or facility. medical record that is not
legible will be considered an
The record requests are: “error.”
Inpatient Hospital, IRF, SNF, Hospice
 10 percent of average monthly Medicare claims (max of 200) per 45 days
Other Part A Billers (Outpatient Hospital, HH)
 1 percent of average monthly Medicare services (max of 200) per 45 days
Physicians
 Solo Practitioner: 10 medical records per 45 days
46

 Partnership of 2-5 individuals: 20 medical records per 45 days
 Group of 6-15 individuals: 30 medical records per 45 days
 Large Group (16+ individuals): 50 medical records per 45 days
Other Part B Billers (DME, Lab)
 1 percent of average monthly Medicare services per 45 days
Be certain your practice recognizes a RAC audit request and complies with that request
immediately. Make this project “top priority.” If the RAC auditor, after conducting the audit,
determines the practitioner needs to refund an overpayment, immediately identify the records
that can be appealed, preparing a detailed statement or report for each record, document rational
and gather supporting documentation. Submit your rebuttal within 15 days of the RAC audit
results, or begin the Medicare appeals process. Keep in mind you will only have 120 days after
refunding the overpayment to file an appeal.
APPEALS
The Medicare Appeals Process
Hospitals, physicians, and other health care providers have a right to appeal a claims decision
after the initial determination is made by a CMS Contractor, a CERT audit, or a RACs
determination. Keep in mind, however, that this does not keep you from refunding alleged
overpayments within the required time frame. You must send overpayment(s) back to CMS
before the appeals process is exhausted. Providers and suppliers who do not accept assignment
have limited appeal rights. Beneficiaries may assign their appeal rights to the provider who
provides items or services on their behalf.
First Level of Appeal—Redetermination
All first level Medicare appeals are now called “redeterminations.” Upon notification that
Medicare has audited a sample of claims in your practice and requested overpayment, a

redetermination may be submitted in writing within 120 calendar days from the date on the
demand letter. If a redetermination appeal is filed within 30 days of the date on the demand
letter, the automatic recoupment process will not start. The FI/Carrier/MAC must render a decision
within 60 days of receipt of the redetermination request. See Appendix A for Redetermination form.
Second Level of Appeal—Reconsideration
Second level appeals are called “reconsiderations” and are conducted by Qualified Independent
Contractors (QICs). If a redetermination does not result in your favor, you may file for
reconsideration. This must be filed within 180 calendar days of the date on the notice of the
redetermination decision. The QIC must process and render a decision within sixty (60) days of
the reconsideration request.
NOTE: “Medical necessity reviews must be performed “by a panel of physicians or other
appropriate health care professionals, and be based on clinical experience, the patient’s medical
records, and medical, technical, and scientific evidence of record to the extent applicable.” 42 CFR §
405.968 (a).
This step can become more labor or resource intensive because the medical practice is required
to submit a full presentation of evidence, and explain the rationale for disagreement with the first
level of appeal. If the practice fails to produce this information at this level of appeal, the
information may not be submitted later. If a reconsideration appeal is filed within 60 days of the
date on the redetermination decision letter, the automatic recoupment process will not start. All
supporting evidence should be produced at this level. The reconsideration level of review is a
paper review; CMS states clearly in the preamble to the final regulations that QICs will not be
conducting hearings. The QIC is supposed to solicit the view of the beneficiary, however. As
noted above, providers and suppliers are required to submit all of the evidence they want
considered in the claim to the QIC. Evidence not submitted may be excluded at subsequent levels
of review. See Appendix A for Reconsideration form.
48

Third Level of Appeal—Administrative Law Judge (ALJ)
The third level of appeal is through an Administrative Law Judge (ALJ) hearing. The ALJ
review has, in the past, been handled through hearings at more than 140 Social Security offices
around the country. HHS has taken over the responsibility and all ALJs is located at four sites—
Cleveland, Ohio; Miami, Fla.; Irvine, Calif.; and Arlington, Va. CMS will begin the recoupment
process (if it has not already started) at this level and higher levels. The request for an ALJ
hearing must be submitted within 60 days of the QIC reconsideration decision. A $120 minimum
claim amount must be in controversy.
To compensate for the limited number of sites, the majority of hearings will be held with video-
conference equipment or by telephone. A beneficiary who wants to appear in person before a
judge must show that “special or extraordinary circumstances exist.” HHS defended its new
policy of using video-conference equipment by stating that such equipment would enable judges
“to complete more cases” within the required 90 day deadline. The ALJ form for the appeal
request is located in Appendix A.
Fourth Level of Appeal—Medicare Appeals Council (MAC)
The fourth level of appeal is a review by the Medicare Appeals Council (MAC), which is part of
the Departmental Appeals Board (DAB) of HHS. The MAC is the final administrative appeal
review for all Medicare cases before a review by a federal district court. An unsatisfied party has
60 days to request a review of an ALJ decision and the MAC review must be completed within
90 days of receipt of a request, with some exceptions.
The MAC is supposed to conduct the review, with only evidence in the record considered unless
a new issue is raised on appeal. The parties have no right to a hearing at the MAC level. A party,
including CMS if it was a party at the ALJ level, may request an oral argument. The MAC may
grant the request if the claim raises an important question of law, policy, or fact that cannot be
decided on written submissions. Generally, a MAC decision is a prerequisite for proceeding with

an appeal in federal court. There is no formal request form. All request for a MAC council
hearing must in writing.
Fifth Level of Appeal—Federal District Court
The fifth level of appeal is the federal district court. This is the final level of appeal and is a
judicial review which must be filed within 60 days of receipt of the MAC decision. When the
practitioner is not satisfied with the council’s decision, a request for a hearing before a federal
district court can be requested within 60 days as long as the amount of the appealed claim
exceeds $1,220. The practitioner will need to hire an attorney to participate in this level of
appeal, and the finding of fact at this final stage is binding and conclusive.
At each level of appeal, manage the process by keeping track of appeal letters, supporting
documentation, billing information, deadlines, outlines of discussions, and results of each appeal
level. It is recommended that the practice create a special file for handling these types of appeals.
Responding to Post-Payment Audits & Refund Requests

for Commercial, Managed Care and Third Party Payers
Before refunding the insurance carrier you should research the accuracy of the payment in
question. Request that the insurance carrier provide an explanation—in writing—as to why they
believe the refund is legitimate, including details of bundling edits, fee schedules, criteria for
payment, and provider bulletins. Review your state’s laws concerning limitations on detecting
and recovering overpayments. Due to the increase in the number of carriers requesting refunds
after payment have been issued, some states have enacted legislation or revised their prompt
payment laws to limit the time frame in which insurers can detect and recoup overpayments. If
you know the claim resulted in double payment, was submitted fraudulently, or was incorrectly
submitted, it is the medical practice’s responsibility to return payment to the insurance carrier. If
you believe the claim was submitted correctly and the service was medically necessary, however,
appeal the insurance carrier’s decision.
50

Recommended Tips
1. You should review the provider contracts to determine how to respond to refund requests.
Provider contracts often outline the insurance carrier’s claim and utilization review
processes, as well as their policy for recovering overpayments or retrospective audits.
2. If the contract does not outline the time frame for refund requests, renegotiate your
contract to include an amendment setting a time limit the insurance carrier has to request
a refund. For example, if state law prohibits carriers from rescinding payment more than
120 days after receiving the payment, a similar time frame should be included in your
provider contract. If your state does not mandate a time frame, a time frame possibly may
be negotiated with the carrier. One “rule of thumb” for negotiation is that the carrier
should have the same amount of time to recoup as you have to file the claim.
3. Provider contracts should be reviewed for mention of “offset” provisions allowing

carriers to deduct from future reimbursement. If such a clause exists, it may be wise to
have it eliminated during your contract negotiations.
4. If you are not a participating provider with the carrier requesting the refund, and your
state law does not have specific guidance, you may contest the request because you may
not be bound contractually to abide by the carrier’s claims and payment policy. This
presumes that there is no allegation of fraud. A related issue would be whether you
accepted assignment when you filed the claim. If you did not accept assignment, the
carrier should deal directly with the patient, as the patient received payment from the
carrier. You may also wish to inform the carrier of your own practice’s policy concerning
refund requests.
5. If the request for the refund was made within the appropriate time frame, the request must
be investigated and, if possible, appealed.

6. It might be beneficial to review the patient’s policy, including the language for covered
benefits and exclusions. The coverage of such procedures may be addressed in the
patient’s policy. If covered, you may produce the patient’s policy as proof that the
services are covered and, therefore, you are not obligated to refund the insurance carrier.
7. For high-cost procedures or services, make sure there is documentation that benefits were
verified prior to surgery, either in writing or with name, date, and time of phone
verification. If it is determined that the patient was not covered at the time of service, or
that the procedure is excluded from the patient’s benefits, it is reasonable for the
insurance carrier to recover payment from the provider and/or patient.
8. The request for a refund may be warranted if the carrier’s post-payment audit found the
procedure to be not medically necessary or billed incorrectly.
9. If the procedure was medically necessary, a letter should be sent to the carrier disputing
the refund, including supporting documentation such as operative reports, physician chart
notes, radiology reports, etc. that support the claim. The practitioner also has the right to
question the plan’s clinical criteria used to determine medical necessity. Keep in mind
that medical necessity issues are different for the provider and insurance carrier.
10. If audited due to a high volume or frequency of services, or inappropriate or repeated use
of procedure or services, complete and accurate documentation is the best defense.
Incomplete documentation will not provide the support required to defend a retrospective
audit.
11. HIPAA Privacy Rules require physicians to release only the “minimum necessary” when
requested. If a carrier's request for information exceeds the minimum necessary standard,
the physician may inform the carrier of his or her position.
12. Other factors prompting the refund request might be in question, such as the carrier issues
concerning the plan’s credentialing or re-credentialing process; or if the request is tied to
a problem identified by the government (i.e. the OIG Work Plan, improper or duplicative
52

billing; or inappropriate use of modifiers). It is wise to create a mechanism within the
practice to capture insurance carrier trends, or to track utilization review decisions
through claim denials.
13. It cannot be stressed enough that an insurance carrier’s request for a refund should not be
ignored. While there are many states that have enacted legislation limiting the time in
which carriers can pursue refunds, such legislation may also place time limits for you to
respond, as well as allow interest to be charged. It is imperative to familiarize yourself
with your state’s Insurance Codes. Contact your State Department of Insurance for
additional information.
14. If a dispute cannot be resolved satisfactorily through the plan’s internal and external
review processes, further appeals through an arbitrator or the court may be required.
15. On occasion, insurance carriers may refuse to withdraw their demand for repayment or
refuse to settle the case on terms agreeable to the provider. The dispute may then go to
arbitration if the provider agreement includes an arbitration clause. Otherwise, litigation
may be initiated. The arbitration process is much like a trial. Both sides are represented
by counsel and the case is heard by one to three arbitrators, who make the ruling.
Responding to a CERT, RAC, or Government Audit
Tips
1. Send in as much documentation as you have, keeping photocopies for yourself.

a. Practices often forget to include information pertinent to a medical record
b. Don’t just send a copy of the progress note for that day, forgetting that there was a
flow sheet updated too, with a change of medication, or a review of systems update
c. Perhaps the medical necessity for that test was documented in a prior note?
d. Do this even if the auditor doesn’t ask for the information

2. Never, ever change any charts or records you submit.
a. Auditors can spot an altered chart in a heartbeat
b. If you feel handwritten notes may be illegible, have a transcript typed, but make it
exact
c. Spelling mistakes [and other errors] have to stay
d. When presenting typed/transcribed copies, include the original note, as well
e. Make sure the typed note is signed
3. Don’t dally in sending records to the auditor.

a. Typically you have a relatively short time frame of 30 days
b. What if the auditor wants records that are harder to collect, such as hospital-based
records?
c. If you have to collect this kind of documentation, start working the day you get the
audit letter
d. If the auditor wants office-based records, and your records are well organized,
collect, copy, and mail the files as soon as you have a chance to review them against
what was billed
4. Try to figure out what the auditor’s concern.

a. Do the files requested share a date of service, a type of service, a diagnosis?
b. An example of a common audit target is excessive billing of higher-level E/M codes
c. This information could help you mount a more targeted and effective response
d. A professional coder could also help spot these patterns
5. Write a very thorough cover letter to accompany the files you send.
a. Describe your practice, your practitioners, and their credentials
b. Put each patient in full context. For each file, describe the condition the patient
presented with that day, the ongoing care the patient was receiving, what procedures
or services were performed, why, what the outcome was, and how the treatment or
54

diagnostic testing was useful. If necessary, include patient information from previous
visits
c. Include expert opinions in an addendum, and reference them. These sources can
include other physicians, professional coders, position papers from national, state, and
local associations, and journal articles.
d. But make sure your sources are uniformly supportive of your position: Don’t give the
auditor any extra ammunition
6. Send all documents certified mail/receipt required.

a. Send a cover letter explaining any unusual circumstances
b. Attach patient information in the order of the listing received
c. Don’t forget any addendums
d. Keep an exact copy for your files
e. Contact the auditor who signed the Probe Review letter for any clarification
Refunding Overpayments
If identified overpayments must be refunded, the provider is expected to issue a refund check to
Medicare. Medicare will issue a refund request letter giving the provider 30 days to make
repayment. After 30 days, interest begins to accrue and an offset is initiated. If the provider
cannot send in the full amount, the provider can contact CMS to determine if a schedule of
repayments will be allowed. CMS may approve a payment schedule for cases in excess of
$1,000.
Problems based on audit findings might have minor or major repercussions depending on the
scope of the audit and the errors found. Minor problems might require returning the overpayment
and educating the provider on improvement, with further audit analysis at a future date.
Moderate problems might additionally require a pre-payment review of all coding and
documentation prior to payment of future claims (100 percent carrier review). Major problems
might lead to performing a statistically-valid random sample possibly to include more than fifty

medical records, exclusion from the Medicare or Medicaid programs(s), a Corporate Integrity
agreement (CIA), or referral to the fraud department or the Office of Inspector General for
investigation.
Minor Problem • Education of provider on appropriate billing procedure

• Collection of overpayments
• Further analysis at later date
Moderate Problem • Education of provider on appropriate billing procedure

• Initiation of pre-payment review until corrected
Major Problem • Education of provider on appropriate billing procedure

• Initiation of high level of pre-payment review and/or
• Statistically valid random sample
• Payment suspension
• Referral to Fraud Department
56

PREVENTION
How do you take a proactive approach and give your practice a “shot” of prevention? A
comprehensive Compliance Plan should be the foundation of every medical practice.
Another proactive step is to perform compliance audits and continue to monitor problem areas so
there are no surprises when an insurance carrier audits your claims. Not only should you audit
the documentation, but the claims data as well, ensuring that claims are submitted correctly with
the correct dates of service, correct practitioner, appropriate modifiers, and correct procedures
and diagnosis codes to support medical necessity. Education should be a staple in your medical
practice following each and every internal audit.
If an audit reveals a repeated pattern of documentation, coding, and/or billing errors, it is

important to identify the errors promptly and to provide a mechanism for correction based on
errors found. If documentation or coding errors are discovered, education is an excellent tool to
assist in the compliance process.
Prevention Tips
1. Develop a correction plan when problems are identified.
2. Hold regular education and information meetings for both clinical and administrative
staff to keep everyone updated on new regulations, new carrier guidance, new coding
rules, etc. so that everyone is fully informed.
3. Continue to monitor specific areas or compliance issues on an ongoing basis.
4. Keep track of audits. To support the medical practice’s efforts to report procedures and
services correctly, follow up with meetings with provider and staff to discuss compliance.
5. Never stop improving the claims submission and audit processes in the medical practice.
Review the processes each year and make improvements when necessary.
6. If your practice employs an auditor, consider—at least once per year —hiring an outside
coding reviewer to validate the medical practice’s progress.
7. Remain on the alert and the defensive. Enforce disciplinary standards within the medical

practice.
8. Compare the CMS frequency data when reviewing E/M services based on specialty:
http://www.cms.hhs.gov/MedicareFeeforSvcPartsAB/04_MedicareUtilizationforPartB.as
p#TopOfPage

Have that Fifteen Minute Conversation with your Physician
Completing a coding audit accomplishes very little unless a serious effort is undertaken to
fix the problems that are identified. Establishing an on-going reporting and feedback system
to the provider is important. If you don’t communicate audit results with identified solutions
for fixing the problem, the provider will not know errors exist. Keep your providers up-to-
date on all coding, reimbursement, and policy changes. Keep in mind that the physician did
not go to medical school to learn how to code and file insurance claims. In fact, most
physicians received minimal or no training related to coding or billing in medical school.
Correcting any systematic under coding uncovered in an audit will enable you to collect the
revenue to which you are entitled. Addressing documentation deficiencies will minimize the
likelihood that you will have to pay money back to Medicare or another payer if audited.
Continuous education of practitioners and staff is vital to maintaining the “health” of the
practice. Reinforce the importance of correct coding. Encourage as essential clear, accurate, and
detailed documentation for every patient encounter.
58

CONCLUSION
It is critical for any provider of service to be aware that any audit by an insurance carrier is
fraught with pitfalls, and can have serious repercussions not only in relation to his or her status
with the insurance carrier, but concerning the practitioner’s medical license, possible civil
liability exposure, and/or breach of confidentiality. For this reason, any inquiry by an insurance
carrier, request for overpayment, and/or audit request should be treated very seriously.
Web Sites of Interest
Office of the Inspector General: http://www.oig.hhs.gov

Centers for Medicare and Medicaid Services (CMS): http://ww.cms.hhs.gov
Recovery Audit Contractors: http://www.cms.hhs.gov/RAC
CERT Web site: www.cert.org
Comprehensive Error Rate Testing: http: www.cms.hhs.gov/CERT
Sources: OIG Workplan 2009

CMS RAC Demonstration Project
CMS Comprehensive Error Rate Testing Program
The Medicare Recovery Contractor Audit Program
American Medical Association
Medical Record Chart Auditor, 2007, American Medical Association
Various insurance carrier audit plans

APPENDIX A
Recovery Audit Contractor (RAC)
Comparison between Demonstration and Permanent RACs

Demonstration RACs Permanent RACs
RAC Medical Director No Required Mandatory
Certified Coding Experts Optional Mandatory
Minimum Review Threshold $10.00 aggregate claims $10.00 minimum claims
Independent Validation Process Optional Mandatory
RAC payback contingency fee if Only if claim is overturned Any level of Appeal
claim overturned on Appeal on first level of Appeal
Vulnerability Reporting Annually Monthly
Standardized letters to providers Standard Manual Letters Unique letters created for the
RAC program with AHA/AMA
guidance
Claims Review look back period 4 years 3 years

(claim payment date—date of
Medical record request
Maximum claim review period 4 years 10/1/2007
Allowed to review current fiscal No Yes

year claims
Limit on number of requested Optional—each RAC sets Mandatory, CMS established
medical record own limit nationwide limits
Timeframe for paying None Within 45 days of receipt of

photocopying for requested medical record
records
MSP included Yes No
Quality Assurance SAS-70 review No Yes

Remote Call Monitoring Yes Yes
Provider Web Portal for No Yes

communication
Other Contractor Performance No Yes
Audits/Evaluations
60

APPENDIX B – FORMS AND SLIDES

DEPARTMENT OF HEALTH AND HUMAN SERVICES
CENTERS FOR MEDICARE & MEDICAID SERVICES
MEDICARE REDETERMINATION REQUEST FORM
1. Beneficiary’s Name:_____________________________________________________________________
2. Medicare Number: ______________________________________________________________________
3. Description of Item or Service in Question: __________________________________________________
4. Date the Service or Item was Received: _____________________________________________________
5. I do not agree with the determination of my claim. MY REASONS ARE:
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
6. Date of the initial determination notice ______________________________________________________

(If you received your initial determination notice more than 120 days ago, include your reason for not making this request earlier.)
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
7. Additional Information Medicare Should Consider: ____________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
8. Requester’s Name:______________________________________________________________________
9. Requester’s Relationship to the Beneficiary: _________________________________________________
10. Requester’s Address: ____________________________________________________________________
_____________________________________________________________________________________
11. Requester’s Telephone Number: ___________________________________________________________
12. Requester’s Signature: ___________________________________________________________________
13. Date Signed: __________________________________________________________________________
14. ❏ I have evidence to submit. (Attach such evidence to this form.)

❏ I do not have evidence to submit.
NOTICE: Anyone who misrepresents or falsifies essential information requested by this form may upon
conviction be subject to fine or imprisonment under Federal Law.
Form CMS-20027 (05/05) EF 05/2005
CENTERS FOR MEDICARE & MEDICAID SERVICES
MEDICARE RECONSIDERATION REQUEST FORM
1. Beneficiary’s Name:_____________________________________________________________________
2. Medicare Number: ______________________________________________________________________
3. Description of Item or Service in Question: __________________________________________________
4. Date the Service or Item was Received: _____________________________________________________
5. I do not agree with the determination of my claim. MY REASONS ARE:
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
6. Date of the redetermination notice__________________________________________________________

(If you received your redetermination more than 180 days ago, include your reason for not making this request earlier.)
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
7. Additional Information Medicare Should Consider: ____________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
8. Requester’s Name:______________________________________________________________________
9. Requester’s Relationship to the Beneficiary: _________________________________________________
10. Requester’s Address: ____________________________________________________________________
_____________________________________________________________________________________
11. Requester’s Telephone Number: ___________________________________________________________
12. Requester’s Signature: ___________________________________________________________________
13. Date Signed: __________________________________________________________________________
14. ❏ I have evidence to submit. (Attach such evidence to this form.)

❏ I do not have evidence to submit.
15. Name of the Medicare Contractor that Made the Redetermination:________________________________
NOTICE: Anyone who misrepresents or falsifies essential information requested by this form may upon
conviction be subject to fine or imprisonment under Federal Law.
Form CMS-20033 (05/05) EF (05/2005)
OFFICE OF MEDICARE HEARINGS AND APPEALS
REQUEST FOR MEDICARE HEARING BY AN ADMINISTRATIVE LAW JUDGE ❏ Part A

Effective July 1, 2005. For use by party to a reconsideration determination issued by a Qualified Independent Contractor (QIC) ❏ Part B
(Amount in controversy must be $100 or more.)
Send copies of this completed form to:
Original — Office of Medicare Hearings and Appeals Field Office specified in the QIC Reconsideration Notice
Copy — Appellant Copy — All other parties
Failure to send a copy of this completed request to the other parties to the appeal will delay the start date of your appeal.
Did you send all required copies? ❏ Yes ❏ No
Appellant (The party appealing the reconsideration determination)
Beneficiary (Leave blank if same as the appellant.) Provider or Supplier (Leave blank if same as the appellant.)
Address Address
City State Zip Code City State Zip Code
Area Code/Telephone Number E-mail Address Area Code/Telephone Number E-mail Address
Health Insurance (Medicare) Claim Number Document control number assigned by the QIC
QIC that made the reconsideration determination Dates of Service

From To
I DISAGREE WITH THE DETERMINATION MADE ON MY APPEAL BECAUSE:
____________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________
You have a right to be represented at the hearing. If you are not represented but would like to be, your Office of Medicare Hearings and Appeals
Field Office will give you a list of legal referral and service organizations. (If you are represented and have not already done so, complete form CMS-1696.)
Check ❏ I wish to have a hearing. Check ❏ I have additional evidence to submit.
Only One Only One ❏ I have no additional evidence to submit.
❏ I do not wish to have a hearing and I request that a
Statement: Statement:
decision be made on the basis of the evidence in my
If you have additional evidence to submit, please attach the evidence or attach
case. (Complete form HHS-723, “Waiver of Right to an a statement explaining what you intend to submit and when you intend to submit
ALJ Hearing.”) it. If you are a provider, supplier, or beneficiary represented by a provider or supplier,
the evidence must be accompanied by a good cause statement explaining why
the evidence is being submitted for the first time at the ALJ level.
The appellant should complete No. 1 and the representative, if any, should complete No. 2. If a representative is not present to sign, print
his or her name in No. 2. Where applicable, check to indicate if appellant will accompany the representative at the hearing. ❏ Yes ❏ No
1. (Appellant’s Signature) Date 2. (Representative’s Signature/Name) Date
Address Address ❏ Attorney

❏ Non-Attorney
City State Zip Code City State Zip Code
Area Code/Telephone Number E-mail Address Area Code/Telephone Number E-mail Address
Answer the following questions that apply:

A) Does request involve multiple claims? (If yes, a list of all the claims must be attached.) ❏ Yes ❏ No
B) Does request involve multiple beneficiaries? (If yes, a list of beneficiaries, their HICNs and the dates of service.) ❏ Yes ❏ No
C) Did the beneficiary assign his or her appeal rights to you as the provider/supplier? ❏ Yes ❏ No
(If yes, you must complete and attach form CMS-20031. Failure to do so will prevent approval of the assignment.)
Must be completed by the provider/supplier if representing the beneficiary:
I waive my rights to charge and collect a fee for representing ________________________________________________before the Office of
Medicare Hearings and Appeals. (Beneficiary name)
Signature of provider/supplier representing beneficiary Date
CMS-20034 A/B U3 (08/05) EF 08/2005 ATTACH A COPY OF THE RECONSIDERATION DETERMINATION

(IF AVAILABLE) TO THIS COPY.
Must be completed by the provider/supplier if representing the beneficiary, they furnished the item(s) or services(s) at issue, and the appeal
involves a question of liability under section 1879(a)(2) of the Social Security Act:
I waive my right to collect payment from the beneficiary for the furnished items or services at issue involving 1879(a)(2) of the Social Security Act.
Signature of provider/supplier representing beneficiary Date
TO BE COMPLETED BY THE OFFICE OF MEDICARE HEARINGS AND APPEALS

Is this request filed timely? ❏ Yes ❏ No
If no, attach appellant’s explanation for delay. If there is no explanation, send a Notice of Late Filing of Request for ALJ Hearing to the
appellant and representative, if applicable, to request such an explanation.
Request received on Field Office Employee
Assigned on Assigned by Assigned to
Special response case? ❏ Yes ❏ No

If yes, explain why and state the targeted adjudication deadline.
_______________________________________________________________________________________________________________
___________________________________________________________________________________
Interpreter/translator needed (including sign language) ❏ Yes ❏ No
If yes, type needed:
_______________________________________________________________________________________________________________
___________________________________________________________________________________
If appellant not represented, has a list of legal referral and service organizations been provided. ❏ Yes ❏ No
PRIVACY ACT STATEMENT
The legal authority for the collection of information on this form is authorized by the Social Security Act (section 1155 of Title XI and sections
1852(g)(5), 1860D-4(h)(1), 1869(b)(1), and 1876 of Title XVIII). The information provided will be used to further document your appeal.
Submission of the information requested on this form is voluntary, but failure to provide all or any part of the requested information may affect
the determination of your appeal. Information you furnish on this form may be disclosed by the Office of Medicare Hearings and Appeals to
another person or governmental agency only with respect to the Medicare Program and to comply with Federal laws requiring the disclosure of
information or the exchange of information between the Department of Health and Human Services and other agencies.
CMS-20034 A/B U3 (08/05) EF 08/2005

4/22/2009
Prepare for Recovery Audits

Protect Your Practice
Add Presenter Name Here
AGENDA
 9:00 – 10: 45 am
 Lecture
 10:45 – 11: 00 am
 Break
 11:00 – 12:00 pm
 Lecture
1
4/22/2009
INTRODUCTION
 Internal billing audits are vital to the health of the
medical practice
 Auditing physician charges and billing practices
 Burdensome
 Ultimately improve claims management processes, cash
flow, and compliance with insurance carriers and
applicable laws and regulations
 An annual audit allows the medical practice to identify
specific coding issues that may occur or reoccur in similar
claims submissions
Internal Audits
 If you identify any aberrant coding patterns
 A more frequent audit might be beneficial
 Careful pre
pre-submission
submission monitoring and review of similar
claims may safeguard against errors that could result in
either claim denial or audit recovery from an insurance
carrier, whether from:
 A commercial payer
 Third-party payer
 Government carrier
2
4/22/2009
Internal Audits
 An internal audit gives the physician and medical practice
staff the opportunity to identify incorrect coding and billing
patterns and overutilization of procedures and services
before an outside auditor recovers payments or assesses
fines and penalties
 An Internal Billing Audit can help insure appropriate payment
and compliance with applicable laws and carrier regulations
 Auditing physician services and billing practices is a difficult
task, but will typically improve:
 Coding,
g,
 Documentation
 Cash flow
 Claims management
 Compliance with applicable laws and insurance carrier regulations
Analysis of Physician Billing

 Providers of healthcare services should be cognizant of:
 Coding and billing requirements for health care services rendered
 To ensure that documentation satisfies level and scope of services provided
 Insurance companies recoup millions of dollars in refunds from
providers unable to justify care
 Insurer’s fundamental existence and financial success requires:
 Detailed analysis of provider’s practice patterns using information
management systems
 To identify over-utilization of services
 Extensive data banks provide frequency reports for a CPT code and compares
b
based
d on percentage
t off services
i bill
billed
d
 By same specialty
 Similar patient population
3
4/22/2009
Data Mining
 Insurance carrier generates profiles
 Gathers data for utilization
 How often a procedure is performed
 Where the procedure is performed
 What CPT code is reported
 Individual physician’s profile is compared to other providers
 Insurance carrier maintains data banks for comparison:
 When a provider orders laboratory tests
 What test are ordered
 What p
procedure and diagnosis
g codes are reported
p
 Diagnosis code reporting frequency and medical necessity
 Insurance carrier generates provider profiles and compares
information across specialty areas
Audit or Investigation
 When data mining has been completed and coding pattern of
a provider or group of providers has been identified
 An audit or investigation might be implemented
 R
Requestt for
f repaymentt based
b d on claims
l i d
data
t
 Request for repayment of previously paid claims without a
review of the medical record(s) is called a Payback
 Request can be in the form of a written request for repayment
 Insurance carrier takes the money back by deducting future payments
without requesting the return of money
 Another problem that can occur based on data mining
 Insurance carrier will downcode a level of service, such as an
evaluation and management service (E/M), to a lower level
 Reducing expected reimbursement
4
4/22/2009
Audit or Investigation
 “I was paid for the service
so the coding/billing must Especially today, with
be correct our downturned
 This is not always economy, insurance
carriers are looking for
the case ways to recoup dollars
 Insurance carriers pay spent on health care.
claims frequently that
either should have
been
b denied
d i d or
suspended for further
investigation
WHAT TRIGGERS AN AUDIT?

 A retrospective audit
 Cost containment mechanism that health plans use
to determine whether overpayment on claims have
been made to a particular physician, practitioner, or
hospital
 In today’s regulatory environment, it is not if, but
when your practice will receive a letter from the
insurance carrier, either asking for medical records,
or a planned visit to your practice
10
5
4/22/2009
What Triggers an Audit

 Examples of “Red Flags”
 Reporting the same level of service for an evaluation and
management service
 Reporting high levels of E/M service outside the “bell
curve”
 Many insurance carriers are concerned with the constant use of level four
and five visits because reimbursement is higher for these services
 Performance of diagnostic procedures in the medical office as “routine”
 The cardiologist orders a stress test on every new patient, the pattern might draw
attention to the insurance carrier who will investigate for medical necessity
 Billing under one provider’s NPI while waiting for another provider
to be credentialed
11

 Inconsistent coding among  Upcoding evaluation and
partners within a group. management services
 Coding high levels of  Unbundling procedures and
evaluation and management services
services for a new patient,  Improper use of modifiers
or reporting a consultation  Inadequate documentation
for every new patient
 Submitting “unspecified
 Downcoding evaluation and diagnoses” consistently
management services
 Patient and/or provider
complaints
12
6
4/22/2009

 Cases that are most often prosecuted involve suspected fraud for
such activities as:
 Billing for goods and services not rendered
 Billi ffor phantom
Billing h t patients
ti t
 Upcoding or billing for more time than the duration of the actual
service
 Charging Medicare patients more than non-Medicare patients for the
same services
 Paying kickbacks in exchange for referrals
 Misrepresenting non-covered services as covered
 Billing for medically unnecessary tests
 Misrepresenting the quality of care provided
 Double billing
 Billing incident to services when the physician is not present
13
Prosecuted Fraud Cases

 A surgeon who took advice from a list-serve was convicted of
Medicare fraud and was sentenced to twenty years in prison for
unbundling surgical procedures
 The surgeon assumed all advice on a list-serv
list serv from a certified
coder/consultant was correct. The coder/consultant was not even investigated
 In Florida, a doctor was sentenced to 78 months in prison and
ordered to pay $504,000 in restitution and forfeit an additional
$705,000 after a jury found her guilty on all counts of an 89-count
indictment, including 44 charges of health care fraud
 The physician, who practiced dermatology, billed Medicare as if she
performed highly complex surgical closure procedures when she actually
only performed simple surgical stitches, or no procedure at all
14
7
4/22/2009
Government Scrutiny
 The government might enter into an agreement with the
practitioner to pay fines and penalties, as well as to
recover the overpayment from the provider
 The government typically will offer the practitioner or medical
group a “Corporate Integrity Agreement” (CIA) in which the
practitioner or medical group is under federal government scrutiny
for several years, in which a yearly audit is conducted by an
uninterested third party approved by the government
 Another type of agreement might be a CCA or a Certificate of
Compliance Agreement
 If the practitioner or group has an error rate equal to
or greater than 5% as a result of the audit, other
penalties might apply
15
Government Scrutiny
 The factors that can be considered by OIG officials when deciding
whether to issue a CCA or a CIA might include:
 an assessment of whether the provider itself disclosed its alleged
violations
 the amount of monetary damage inflicted upon federal health care
programs
 whether success or liability is involved
 whether the organization is still an active participant in government health
care programs, or is still engaged in the same line of business
 whether the alleged misconduct could, in fact, be repeated
 how far in the past the incident(s) may have occurred
 whether an acceptable compliance program is in place, and the
willingness of a provider to certify its compliance, annually, to the OIG
 Any other pertinent circumstances
16
8
4/22/2009
Audit Actions
 Audits of billing practices result from the following
four actions:
1
1. Random sampling: Many insurance carriers randomly
audit approximately 10% of its providers on an ongoing
basis
2. Focused Medical Review: An insurance carrier
chooses specific CPT codes to review in post payment
audits
 Statistics are run to determine a median number for each of
these codes
 A provider who submits those codes in a volume greater than
the mean may be audited
17
Audit Actions
 Audits of billing practices result from the following
four actions (continued)
3
3. Complaints by staff: The False Claims Act encourages
"whistleblowers" to turn in employers suspected of
submitting false claims through rewards of 15% to 30%
of the total amount recovered by the government
4. Patient complaints: Medicare is required by law to
investigate all complaints brought by Medicare
beneficiaries
 Many insurance carriers respond to patient complaints in the
same manner
18
9
4/22/2009
The Insurance Audit

 An audit is:
 Examination of medical records to:
 Determine what procedure or service is performed
 If documentation is compliant
 Claim is correctly coded
 All charges captured
 Many other performance components may be measured
 Insurance carriers conduct audits:
 Validate that the service reported on the claim form is correctly
reported
 Medical necessity is supported in the documentation
19
The Insurance Audit

 Insurance carrier will:
 Contact provider in writing
requesting records or site
visit
 If participating physician
must comply with audit
pursuant to provider
agreement
 Even if not part of network
or participating, may be
subject to claim review
 Based on Federal and State
Laws
20
10
4/22/2009
The Insurance Audit

 Sometimes a carrier will send the provider a letter
several months before auditing making the provider
aware that he/she is an “outlier”
outlier
 Warning to a provider to begin an internal review of
his/her coding practices and documentation to ensure
he/she can withstand carrier scrutiny
 If errors are found this gives the provider time to:
 Make changes to documentation patterns
 Change coding patterns
 Self-disclose coding or billing errors
 Refund any overpayments to the insurance company
21
Responding to the Audit Request

 Should be well thought out, planned, and implemented
 Response depends on three factors
1
1. Type of audit
2. Scope of audit
3. Duration of the audit
 Some requests for an audit will be in the form of a letter
requesting specific medical records and/or
documentation for specific dates of service
 You should also include any supporting documentation,
documentation such
as lab reports, radiology reports, etc., if it will help support the
service provided

22
11
4/22/2009
Responding to the Audit Request

 Many insurance auditors will make a site visit to the
medical practice
 The insurance carrier will request
q specific
p records typically
yp y by
y
patient name and identification number
 They will request a quiet place to work, and access to the
medical records
 Before you allow anyone access to your medical records;
check their identification and authorization to the medical
records
 An audit investigation might include your practice
practice’ss sign
sign-in
in
sheet, superbills or charge tickets, daily appointment
schedules, or other supporting evidence the carrier requests

23
True Story
 An insurance company performed an analysis of a large
group practice in a metropolitan area
 They extrapolated data for a three-year period
 The carrier requested appointment records for the three-year
period and did not request medical records
 The carrier analyzed the data (which took a year) and, based on
the fact that some patients did not have appointments, the
insurance carrier requested $3.2 million to be refunded
 This group of physicians manages many trauma cases and
performs p
p procedures referred from the ER
 Of course they would not make appointments
 Many of the cases were inpatient hospital admissions and subsequent
visits—would you expect the patient to make an appointment?
24
12
4/22/2009
RECOVERY AUDITS
 The purpose of an audit is to recover payments
made to a practitioner, and to uncover:
 Inappropriate billing
 Inappropriate Coding
 Lack of medical necessity
 Many types of recovery audits exist:
 Commercial/third party payer
 Medicare and Medicaid
 Comprehensive Error Rate Testing (CERT)
 Recovery Audit Contractors (RACs)
25
Retrospective Audit
 These notices should include the reason for the
suspected overpayment(s) such as:
 Compliance with coding requirements for evaluation and
management services
 Surgical procedures and modifiers
 Documentation requirements
 Medical necessity supported by the diagnosis code
 If the insurance carrier disputes medical necessity or
eligibility for reimbursement of procedures or services
 The insurance carrier might request additional information, such
as medical record documentation, to assist in making a
determination
26
13
4/22/2009
Focused Review
It is vital that the
 Focused medical review is an practitioner bill evaluation
in-depth look at a specific and management services
based on the medical
area of the practitioner
practitioner’ss
complexity of the patient,
coding or billing practices. and report each service case
 Typically this type of review by case, based on
requires the insurance carrier documentation and medical
necessity for the service
to use national statistics to
provided
identify a medical practice with
high numbers of expensive
procedures
27
Government Audits
 Medicare Fee for Service (FFS)
 Number of payment systems
 Network of contractors
 Process 1.2 billion claims per year with over 1 million
providers affected
 Medicare Contractors
 Process claims
 Make payments to health care providers in accordance to
Medicare regulations
 Educate providers how to submit accurately claims that
meet medical necessity guidelines
 Many times they pay claims without scrutinizing medical
records
28
14
4/22/2009
Government Audits
 Centers for Medicare and Medicaid Services (CMS)
 Conducts frequent audits
 Ensure compliance with
 Coding guidelines
 Local carrier determinations (LCDs)
 National carrier determinations
 Coverage issues
 Coding and billing patterns (utilization)
 Most common audits

 Comprehensive
C h i EError R
Rate
t TTesting
ti
 Recovery Audit Contractors
 Audits based on utilization (Quality Improvement

Organization (QIO)
29
Comprehensive Error Rate Testing (CERT)

 Primary goal of CMS—Pay it RIGHT!
 Pay the right amount to the right provider for covered and
appropriately-coded
app op a e y coded procedures
p ocedu es and
a d services
se ces
 Budget constraints limit the claim reviews contractor
conducts
 As part of its Improper Payments Information Act
(IPIA) compliance efforts, and to help all Medicare
FFS Contractors better focus review and education
 CMS has established the Comprehensi
Comprehensive e Error Rate
Testing (CERT) program and Hospital Payment
Monitoring Program (HPMP) to sample and review
randomly claims submitted to Medicare
30
15
4/22/2009
CERT Program
Comprehensive Error Rate Testing
 Produces national, contractor-specific, and benefit
category-specific paid claim error rates
 IIndependent
d d reviewers
i periodically
i di ll review
i a random
d sample
l off claims
l i
identified as soon as they are accepted into the claims processing
system
 Claims are followed through to their final disposition.
 Paid claims are reviewed by the independent reviewers

 Denied claims validated to ensure that the decision was appropriate
 Project results in
 National paid claims error rate
 Claims processing error rate
 Provider compliance rate
 Paid claims benefit specific error rate
31
CERT Program
 2008, CERT program utilized following methodology:
 CERT randomly selecting sample of 129,875 claims
submitted to Carriers/DMERCs/FIs during reporting period
 HPMP randomly selecting sample of 39,841 acute care inpatient
hospital discharges
 Requested medical records from the health care providers that
submitted claims to be included in the sample
 Where medical records were submitted by provider, reviewing the
claims in the sample and the associated medical records to see if the
claims complied with Medicare coverage, coding, and billing rules, and,
if not,
not assigning errors to the claims
 Where medical records were not submitted by the provider, classifying
the case as a “no documentation” claim and counting it as an error
 Sending providers overpayment letters/notices or making adjustments
for claims that were overpaid or underpaid
32
16
4/22/2009
Latest Data
2008 CERT Error Rate
2008 Error
Rate
(Overpayments +
Overpayments Underpayments Underpayments)
Type of Total Dollars Improper

Contractor Paid Payment Rate Payment Rate Payments Error Rates
Carrier $74.9B $3.2B 4.2% $0.2B 0.3% $3.4B 4.5%
DMERC $9.9B $0.9B 8.9% $0B 0.1% $0.9B 9.0%
FI $89.4B $1.2B 1.3% $0.1B 0.2% $1.3B 1.5%
QIOs $102B $4B 4.0% $0.5B 0.5% $4.6B 4.5%
All Medicare
FFS $276.2B $9.3B 3.4% $0.9B 0.3% $10.2B 3.7%
33
CERT Program
 Purpose of error rate findings
 Determine underlying reasons for claim errors and to
adjust the CMS action plans to improve compliance in:
 Coding
 Documentation
 Provider billing practices
 Payment
 Tracking and reporting identifies trends and helps to
implement corrective action for all Medicare FFS
contractors
 Assists with adjustment of contractors error rate reduction plans
34
17
4/22/2009
National Error Rate by Year

Year Total Dollars Overpayments Underpayments Overpayments +
Paid Underpayments
Payment Rate Payment Rate Improper Rate
Payments
1996 $168.1 B $23.5B 14.0% $0.3 B 0.2% $23.8 B 14.2%

1997 $177.9 B $20.6B 11.6% $0.3 B 0.2% $20.9 B 11.8%
1998 $177.0 B $13.8B 7.8% $1.2 B 0.6% $14.9 B 8.4%
1999 $168.9 B $14.0B 8.3% $0.5 B 0.3% $14.5 B 8.6%
2000 $174.6 B $14.1B 8.1% $2.3 B 1.3% $16.4 B 9.4%
2001 $191.3 B $14.4B 7.5% $2.4 B 1.3% $16.8 B 8.8%
2002 $212.8 B $15.2B 7.1% $1.9 B 0.9% $17.1 B 8.0%
2003 $199.1 B $20.5B 10.3% $0.9 B 0.5% $12.7 B 6.4%
2004 $213 5 B
$213.5 $20 8B
$20.8B 9 7%
9.7% $0 9 B
$0.9 0 4%
0.4% $21 7 B
$21.7 10 1%
10.1%
2005 $234.1 B $11.2 B 4.8% $0.9 B 0.4% $12.1 B 5.2%
2006 $246.8 B $9.8 B 4.0% $1.0 B 0.4% $10.8 B 4.4%
2007 $276.2 B $9.8 B 3.6% $1.0 B 0.4% $10.8 B 3.9%
May 2008 $276.2 B $9.3 B 3.4% $0.9 B 0.3% $10.2 B 3.7%
35
CERT Example
 “A Carrier paid a physician $198.73 for an inpatient
consult, Current Procedural Terminology (CPT) 99255”
 This Evaluation and Management
g service requires
q 3 of 3 key
y
components: a comprehensive history, a comprehensive examination and
high complexity medical decision making.
 The medical reviewer determined that the documentation
supported the comprehensive history, a detailed
examination and moderate complexity medical decision
making
 Th reviewer
The i determined
d t i d that
th t the
th documentation
d t ti
supported the lower level code of 99253.
 This resulted in the claim recalculated amount of $100.24
and a $98.49 overpayment to the provider
36
18
4/22/2009
THE RACs ARE BACK!!!
37
Background RAC Legislation

 Medicare Modernization Act
 Three-year demonstration project
 Recover overpayments and identify underpayments
 Payment made on a contingency fee basis
 Three states selected based on highest per capita

Medicare utilization:
 California


Florida
New York
+ South Carolina
Massachusetts
 Tax Relief and Health Care Act of 2006

 Expanded to all states by 2010
38
19
4/22/2009
Concerns from Office of Management

and Budget (OMB)
 10.8 billion in improper payments were made in 2007
 Government taking a proactive approach to safeguard
Medicare program
 CERT program produced error rates and estimates of
improper payments to evaluate CMS contractors and
program performance
 CMS uses error rate data to identify existing problems
and target improvement efforts
 Error Rate Reduction Plan (ERRP)
 Identifies strategies to clarify CMS policies and implement
new initiatives for reducing improper payments
39
Medicare is Among the Top Three Federal

Programs with Improper Payments
 According to a January 2008 report by the GAO,
Medicare is one of the top three federal programs
with improper payments
40
20
4/22/2009
Where did RACs find Overpayments?

Most overpayments were collected from inpatient
hospital services for medical necessity and coding
Outpatient
Hosp/IRF/SNF 14% Incorrectly Coded 35% Other
17%
DME 1%
Physician/ No/Insufficient
Ambulance/ Documentation 8%
Lab/Other 1.5%
Inpatient
Hospital 84%
Medically Unnecessary
40%
95% or more
from Hospitals
SOURCE: RAC Data Warehouse, CMS presentation on 5/13/08
41
Improper Payments Corrected by the RAC

Demonstration—Cumulative through 3/27/08
RAC Overpayments Underpayments Total Improper

Collected Repaid Payments
Corrected
Connolly $266.1 $4.3 $270.4
HDI $396.1 $20.8 $416.9
PRG $317.8 $12.7 $330.5
Claim RAC Subtotal $980.0 $37.8 $1,017.8

HMS $1.3 $0.0 $1.3
DCS $11.4 $0.0 $11.4
MSP RAC Subtotal $12.7 $0.0 $12.7 $

Grand Total $992.7 $37.8 1,030.5
Source: For Claim RACs, RAC invoice files and RAC Data Warehouse. For MSP RACs, Treasury Deposit Slips.
42
42
21
4/22/2009
Selecting Claims
 RACs choose issues to review based on data mining
techniques, OIG & GAO reports, CERT reports, and the
experience and knowledge of staff
 Two types of review
 Automated (no medical record)
 Complex (medical records)
 New Issues for review will be posted to RACs Web site

 RACs will be able to look back three years from the date the
claim was paid
 Could not review before 10/1/07
43 43
Type of RAC Audits

 Automated review – when the RAC is able to make an
over/under payment determination without evaluating the
medical record
 Excessive unit audits – the RACC searches ffor claims for
f two or
more identical surgical procedures for the same beneficiary on the
same day at the same hospital
 Incorrect discharge status code – the RAC reviews the full claims
series for a given time and discovers the hospital had coded the
beneficiary as going home; however, a second claims from
another provider indicated the beneficiary was in fact transferred
from the first hospital
 Duplicate
p services
 Complex review – when the RAC makes an over/under

payment determination after evaluating the medical
record
44
22
4/22/2009
What RACs May Not Review:

 Services provided under a program other than Medicare
FFS (i.e., Medicare Advantage)
 Incorrect levels of evaluation and management
services—however, RACs could review E/M services
for duplicate payments, violation of global surgery rules,
type of service, etc.
 Hospice and home health services
 Payments made to providers under a CMS
demonstration
 Claims previously reviewed by another Medicare
contractor
 Claims involving a potential fraud investigation
 Prepayment Review
45
Question
“Will the Recovery Audit Contractors (RAC) review
evaluation and management (E&M) services on
physician
p y claims under Part B?”
Answer:
Yes, the review of all evaluation and management (E & M) services will be
allowed under the RAC program. The review of duplicate claims or E & M
services that should be included in a global surgery were available for review
during the RAC demonstration and will continue to be available for review.
The review of the level of the visit of some E & M services was not
included in the RAC demonstration. CMS will work closely y with the
American Medical Association and the physician community prior to
any reviews being completed regarding the level of the visit and will
provide notice to the physician community before the RACs are
allowed to begin reviews of evaluation and management (E & M)
services and the level of the visit.
46
23
4/22/2009
Overpayments Collected by Type of Error

and Provider Type

Overpayments Collected By Error Type (NET OF APPEALS) – FY 2007
Inpatient Outpatient Physician Ambulance Durable Total Overpayments
Hospital Hospital Lab, Other Medical Collected
and SNF Equipment
Incorrectly $ 123.8 m $ 7.6 m $ 4.8 m $ 2.2 m $ 4.7 m $ 143.2 m
Coded
Med. $ 106.5 m $ 4.8 m $ 0.2 m < $ 0.1 m $ 0.0 m $ 111.5 m
Unnecessary
No/Insufficient $ 29.6 m $ 0.4 m $ 0.2 m < $ 0.1 m < $ 0.1 m $ 30.3 m
Doc
Other $ 44.8 m $ 5.4 m $ 7.1 m $ 1.2 m $ 0.5 m $ 59.0 m
Total $ 304.7 m $ 18.2 m $ 12.3 m $ 3.5 m $ 5.3 m $ 344.0 m
47
Improper Payments
 Improper payments included:
 312 million claims
 Prepayment
 Post payment determination
 Appeal rights through Medicare Appeals process
 33.3% claims appealed overturned
 96% overpayments collected
 4% underpayments repaid
48
24
4/22/2009
Improper Payments
 RACs are able to review claims up to three years
past the date of the initial payment
 RAC contractors responsible for independent audits
 RACs compensated on a contingency fee basis
 Determined by the principal collection amount or amount
paid back to the provider
 What happens if a provider appeals and wins?
 Under the demonstration project, RACs were entitled to keep
contingency fees if a denial was upheld at first stage of appeal,
regardless of whether the provider won subsequent appeals
 Permanent Program-RACs return contingency fee
49
RAC Errors by Provider Type
50
25
4/22/2009
Identified Errors by Type
51
Stop Work Order Lifted

 CMS is continuing with permanent RAC program as
of February 4, 2009
 The national permanent RACs are:
 Diversified Collection Services, Inc. of Livermore, California, in
Region A, initially working in Maine, New Hampshire, Vermont,
Massachusetts, Rhode Island and New York
 CGI Technologies and Solutions, Inc. of Fairfax, Virginia, in Region B,
initially working in Michigan, Indiana and Minnesota
 Connolly Consulting Associates, Inc. of Wilton, Connecticut, in Region
C, initially working in South Carolina, Florida, Colorado and New Mexico
 Health Data Insights, Inc. of Las Vegas, Nevada, in Region D, initially
working in Montana, Wyoming, North Dakota, South Dakota, Utah and
Arizona
52
26
4/22/2009
RACs are Permanent

 Implementation in stages over several
months
 Full implementation January 1, 2010
 Will affect all providers nationally
 Detect
 Collect
 Protect the Medicare Trust Fund
53
RAC Schedule
54
27
4/22/2009
Preparing for A RAC Audit

 Be prepared:
 If audited by RAC be prepared to appeal if claim can be defended
 If a dispute:
 Provider has right to discuss finding with RAC representatives
 Appeal RAC findings
 Obtain guidance from an attorney experienced in health care
law prior to appeal
 Assign a point person to manage the appeals process and
RAC request for records
 There are restrictions on sample size based on size of practice
55
Medical Record Limits

 Number of medical records selected for RAC audit might
depend on size of the medical practice or organization
 Under RAC permanent program there is a limit of medical
records that may be requested based on:
 Type
 Size of practice or facility.
 Record requests for physicians are:
 Solo Practitioner: 10 medical records per 45 days
 Partnershipp of 2-5 individuals: 20 medical records p

per 45 days
y
 Group of 6-15 individuals: 30 medical records per 45 days
 Large Group (16+ individuals): 50 medical records per 45 days
56
28
4/22/2009
Appealing Unfavorable Results

 Medicare Appeals Process
 Redetermination from Intermediary/carrier
 Reconsideration from Qualified Independent
Contractor
 Administrative Law Judge appeal
 Medicare Department Appeals Board
 Federal District Court Appeal
57
Medicare Appeals Process
 First Level: Redeterminations

 Provider has 120 days from date of original claim
determination to file an appeal
 Review is conducted by Medicare contractor within
60 days of receipt of request
 New requirements for improved notice or
redeterminations
 Includes specific
p reasons for the decision and
 Summary of relevant clinical or scientific evidence
used in making the decision
 Minimum monetary threshold not required
58
29
4/22/2009
 Second Level: Reconsiderations

 Conducted by a Qualified Independent Contractor
(QIC)
 Must be filed within 180 calendar days of receiving
notice of redetermination decision
 QIC has 60 days to respond
 Must submit full presentation of evidence with
rational for disagreement of first level
redetermination
 Cannot submit this information later
 All supporting evidence should be produced
 Evidence not submitted at this level might be excluded at
subsequent levels
 Minimum monetary threshold not required
59
 Third Level: Administrative Law Judge Review

 If at least $120.00 remains in controversy
 Request can be made within 60 days of receipt of QIC
reconsideration
 Has, in the past, been handled through hearings at
more than 140 Social Security offices around the
country
 To compensate for the limited number of sites, the
majority of hearings will be held with video
video-conference
conference
equipment or by telephone
60
30
4/22/2009

 Fourth Level: Departmental Appeals Board Review
 A dissatisfied party has
 60 days to request a review of an ALJ decision
 Th MAC (M
The (Medicare
di A
Appeals
l C
Council)
il) review
i mustt b
be
completed
 Within 90 days of receipt of a request, with some
exceptions
 MAC is supposed to
 Conduct the review, with only evidence in the record
considered unless a new issue is raised on appeal
 The parties have no right to a hearing at the MAC level
 May request an oral argument
 Generally, a MAC decision is
 Prerequisite for proceeding with an appeal in federal court
61

 Fifth Level: Federal District Court
 If the provider or the patient is not satisfied with the
council’s
council s decision
 Request for a hearing before a federal district court can be
requested
 Request must be within
 60 days
 Amount of the appealed claim must exceed
 $1,220.00 (as of Jan. 1, 2009)
 M t hire
Must hi an attorney
tt t representt provider
to id
62
31
4/22/2009
Responding to A Commercial, Managed

Care or Third Party Payer Audit
 Tip #1
 Review the provider contracts to determine how to respond
to the refund request
 Provider contracts should outline claim and utilization review
process
 Tip #2
 If contract does not outline time frame for refund requests
 Renegotiate contract to include an amendment setting a time limit
i
insurance carrier
i hhas to request a refund
f d
 One "rule of thumb" for negotiation is that the carrier should have
the same amount of time to recoup as you have to file the claim
63
63

 Tip #3
 Provider contracts should be reviewed for mention of
"offset" provisions that allow carriers to deduct from future
reimbursement
 If such a clause exists, it may be wise to have it eliminated during
your contract negotiations
 Tip #4
 If you are not a participating provider with the carrier
requesting
ti the
th refund
f d and d your state
t t law
l does
d nott h
have
specific guidance
 you may contest the request because you may not be
contractually bound to abide by the carrier's claims and payment
policy
64
64
32
4/22/2009

Care or Third-Party Payer Audit
 Tip #5
 If the request for the refund was made within the
appropriate time frame
 The request must be investigated and if possible appealed.
 Tip #6
 Beneficial to review the patient’s policy and review the
language for covered benefits and exclusions
65
65

 Tip #7
 For high cost procedures or services
 Make sure there is documentation that benefits were verified prior
to surgery, either in writing or with name, date, and time of phone
verification
 If patient was not covered at the time of service, or the procedure
is excluded from the patient's benefits, it is reasonable for the
insurance carrier to recover payment from the provider and/or
patient.
 Tip #8
 The request for a refund may be warranted if the carrier's
post-payment audit found the procedure to be not
medically necessary or billed incorrectly
66
66
33
4/22/2009

 Tip #9
 If procedure was medically necessary
 A letter, including supporting documentation, should be sent to
the carrier disputing the refund
 Practitioner has the right to question the plan’s clinical criteria
used to determine medical necessity
 Tip #10
 If audited due to high volume or frequency of services or
i
inappropriate
i t or repeated
t d use off procedure
d or service
i
 Complete and accurate documentation is the best defense
 Incomplete documentation will not provide the support required
to defend a retrospective audit
67
67

 Tip #11
 HIPAA Privacy Rule requires physicians to only release "minimum
necessary" y when requested
q
 If carriers request for information exceeds the minimum necessary standard
 The physician may inform the carrier of his or her position
 Tip #12
 Other factors prompting the refund request might be issue
 Carrier issues concerning the plan's credentialing/re-credentialing
process
 Request is tied to a problem identified by the government (i.e.
(i e the OIG
Work Plan, improper or duplicative billing; or inappropriate use of
modifiers).
 It is wise to create a mechanism within the practice to capture
insurance carrier trends, or to track utilization review decisions
through claim denials.
68
68
34
4/22/2009

 Tip #13
 Insurance carrier’s request for a refund should not be
ignored
 Although many states have enacted legislation limiting the time in
which carriers can pursue refunds, such legislation may also
place time limits for you to respond, as well as allow interest to be
charged
 It is imperative to familiarize yourself with your State’s
Insurance Codes
69
69

 Tip #14
 If dispute cannot be resolved satisfactorily through the
plan’s internal and external review processes
 Further appeals through an arbitrator or the court may be
required
 Tip #15
 Insurance carriers may refuse to withdraw their demand for
repayment or refuse to settle the case on terms agreeable
t the
to th provider
id
 Dispute may go to arbitration if the provider agreement includes
an arbitration clause in participation agreement
 Otherwise litigation may be initiated
70
70
35
4/22/2009
Responding to a CERT or RAC Audit

 Whether RAC or CERT Audit:
 Review the request and check the date you must respond
 If unable to respond by date requested, ask for an extension
 Inform the practitioner whose records are requested: he/she
should be kept informed
 Know what records you will need to send along with supporting
data
 Understand when to seek assistance from:
 Practitioner
 Consultant
C lt t
 Attorney
 Other source
71

 TIP 1: Send in as much documentation as you have,
keeping photocopies for yourself
 Practices often forget
g to include information ppertinent to a
medical record
 Don’t just send a copy of the progress note for that day,
forgetting that there was a flow sheet updated too, with a
change of medication, or a review of systems update
 Perhaps the medical necessity for that test was
documented in a prior note
 Do this even if the auditor doesn’t ask for the information
72
36
4/22/2009

 TIP 2: Never, never, ever change any charts or
records you submit
 Auditors can spot
p an altered chart in a heartbeat
 If you feel handwritten notes may be illegible, have a
transcript typed, but make it exact
 Spelling mistakes [and other errors] have to stay
 Send in both the handwritten note and typed dictation
 Make sure the typed note is signed
73
 TIP 3: Don't dally in sending back the records to

the auditor
 Typically you have a relatively short time frame of 30
days
 What if the auditor wants records that are harder to
collect, such as hospital-based records?
 If you have to collect this kind of documentation, start
working the day you get the audit letter
 Oh
Otherwise:
i If the
h auditor
di wants office-based
ffi b d records—
d
and your records are well organized—collect, copy, and
mail the files as soon as you have a chance to review
them against what was billed
74
37
4/22/2009
 TIP 4: Try to figure out what the auditor may be

concerned about
 Do the files requested share a date of service, a type
of service, a diagnosis?
 An example of a common audit target is excessive billing of
higher-level E/M codes
 This information could help you mount a more targeted and
effective response
 A professional coder could also help spot these patterns
75
 TIP 5: Write a very thorough cover letter to accompany the

files you send
 Describe your practice, your practitioners, and their credentials
 Put each patient in full context. For each file, describe the condition the
patient presented with that day, the ongoing care the patient was
receiving, what procedures or services were performed, why, what the
outcome was, and how the treatment or diagnostic testing was useful.
If necessary, include patient information from previous visits
 Include expert opinions in an addendum and reference them. These
sources can include other physicians, professional coders, position
papers from national, state, and local associations, and journal articles.
 But make sure your sources are uniformly supportive of your position.
Don't give the auditor any extra ammunition
76
38
4/22/2009
 Tip #6 Send all documents certified mail (receipt

required)
 Cover letter
 Explain any unusual circumstances
 Attach patient information in the order of the listing
received
 Don’t forget any addendums or additional documentation
that will support the service reported
 Keep an exact copy for your files!
 Contact the auditor who signed the audit letter if you
have any questions or concerns
77
Detecting Overpayments
 Identified by physicians or beneficiaries
 Identified by review or hearing process
 Identified as a result of an investigation of customer
complaints or random sample of billing practices
 Identified by federal agencies conducting audits
78
78
39
4/22/2009
Refunding Overpayments
 If identified overpayments are required to be refunded
 The p
provider is expected
p to issue a refund check to Medicare
 If identified by Medicare, the provider receives a refund
request letter
 Provider has 30 days to refund
 After 30 days interest begins accruing and offset is initiated
 Scheduling of repayments in excess of $1,000 may be
requested
 Must send overpayment even during the appeals process
79
Progressive Corrective Action

Corrective action based on results any CMS audit
Minor Problem •Education of provider on appropriate billing procedure

•Collection of overpayments
•Further analysis at later date
Moderate Problem •Education of provider on appropriate billing procedure

•Initiation of pre-payment review until corrected
Major Problem •Education of provider on appropriate billing procedure

•Initiation of high level of pre-payment review and/or
•Statistically valid random sample
•Payment suspension
•Referral to Fraud Department
80
40
4/22/2009
Prevention
 How do you take a proactive approach and give your
practice a “shot” of prevention?
 A comprehensive Compliance Plan should be the foundation of
every medical practice
 Perform compliance audits and continue to monitor problem areas
so there are no surprises when any insurance carrier audits your
claims
 Not only should you audit claims data
 Ensuring claims are submitted correctly with the correct dates of
service
 Correct practitioner
 Appropriate modifiers
 Correct procedures and diagnosis codes to support medical necessity
 Education should be a staple in your medical practice following
each and every internal audit
81
Prevention Tips
1. Develop a correction plan when problems are identified.
2. Hold regular education and information meetings for
both clinical and administrative staff to keep everyone
updated on new regulations, new carrier guidance, new
coding rules, etc. so that everyone is fully informed
3. Continue to monitor specific areas or compliance
issues on an ongoing basis
4. Keep track of audits: Conduct follow up meetings with
provider and staff for compliance to support the medical
practice’s efforts to report procedures and services
correctly
82
41
4/22/2009
Prevention Tips-Continued
5. Never stop improving the claims submission and audit
processes in the medical practice. Review the
processes each year and make improvements when
necessary
6. Consider at least once per year even if you have an
auditor employed by the practice, hire an external
coding auditor to audit the medical records to validate
the medical practice’s improvement progress
7. Remain on the alert and the defensive: Enforce
disciplinary standards within the medical practice
83
The Right 15 minute Conversation with

your Provider
 Have that Fifteen Minute Conversation with your
Physician
 Completing a coding audit accomplishes very little unless
a serious effort is undertaken to fix the problems that are
identified
 Establishing an on-going reporting and feedback system to the
provider is important
 If you don’t communicate audit results with identified solutions
for fixing the problem,
problem the provider will not know errors exist
84
42
4/22/2009
The Right 15 minute Conversation with

your Provider
 Keep in mind that the physician did not go to
medical school to learn how to code and file
insurance claims
 In fact, most physicians received minimal or no
training related to coding or billing in medical
school
85
CONCLUSION
 It is critical for any provider of service to be aware that any audit by
an insurance carrier is fraught with pitfalls, and can have serious
repercussions not only in relation to his/her status with the insurance
carrier but concerning the practitioners medical license
carrier, license, possible civil
liability exposure, and/or breach of confidentiality
 Any inquiry by an insurance carrier, request for
overpayment, and/or audit request should be treated very
seriously
 Continuous education of practitioners and staff is vital to
maintaining the “health” of the practice. Reinforce the
importance of correct coding. Consistently providing clear,
accurate, and detailed documentation for every patient
encounter is essential
86
43
4/22/2009
Questions and Discussion
87
Websites to Watch
 Office of the Inspector General: http://www.oig.hhs.gov
 Centers for Medicare and Medicaid Services (CMS):
http://ww.cms.hhs.gov
 Recovery Audit Contractors:
http://www.cms.hhs.gov/RAC
 CERT website: www.cert.org
 Comprehensive Error Rate Testing: http:
www.cms.hhs.gov/CERT
88
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American Academy of Professional Coders

Deborah Grider, CPC, CPC-I, CPC-H, CPC-P, COBGC,

PREPARE FOR RECOVERY AUDITS:

WHAT TRIGGERS AN AUDIT

What Auditors Look For

4. In Florida, a physician was sentenced to 24 months incarceration and ordered to pay

5. In Oklahoma, a physician was sentenced to 33 months in prison and ordered to pay

7. A podiatrist was sentenced to 78 months incarceration and ordered to pay $528,000 in

Another type of agreement is a Certificate of Compliance Agreement (CCA). CCAs are an

Audits of billing practices result from the following four actions:

The Insurance Audit

The insurance carrier must provide the appropriate

High Volume of services: Overutilization or frequency of services that may be identified

Coding: High-level evaluation and management services are consistently on the

This information may be obtained at:

In 2008, the CERT program used the following methodology:

Types of Claims/Admissions Reviewed By CERT and HPMP

Type of Total Dollars Improper Error

Carrier $74.9B $3.2B 4.2% $0.2B 0.3% $3.4B 4.5%

DMERC $9.9B $0.9B 8.9% $0B 0.1% $0.9B 9.0%

FI $89.4B $1.2B 1.3% $0.1B 0.2% $1.3B 1.5%

QIOs $102B $4B 4.0% $0.5B 0.5% $4.6B 4.5%

What Does the CERT Contractors Do with the Claims?

Year Total Dollars Overpayments Underpayments Overpayments +

Summary of Error Rates by Category

Paid Claims Error Rates by Contractor Type

Top 20 Services with Incorrect Coding Errors

Incorrect Coding Errors

Office/outpatient visit, est (99214) 5.5% $244,047,384 5.0% - 6.1%

SNF-inpatient (including Part A) (21) 1.1% $231,568,336 0.5% - 1.6%

Subsequent hospital care (99233) 16.8% $220,483,945 14.7% - 18.9%

Hospital-outpatient (HHA-A also)(under OPPS 13X must be used

Office/outpatient visit, est (99215) 18.6% $128,689,331 16.1% - 21.1%

Office consultation (99244) 17.5% $120,385,360 14.2% - 20.8%

Initial hospital care (99223) 12.7% $106,820,039 10.0% - 15.4%

Inpatient consultation (99254) 15.5% $106,671,540 12.8% - 18.3%

Subsequent hospital care (99232) 3.5% $91,410,988 2.8% - 4.3%

Office/outpatient visit, est (99213) 1.7% $75,715,227 1.4% - 1.9%

Inpatient consultation (99255) 17.7% $75,543,920 13.1% - 22.3%

Office/outpatient visit, new (99204) 20.8% $66,046,693 16.8% - 24.8%

Office consultation (99245) 19.1% $65,230,754 14.3% - 23.9%

Office consultation (99243) 9.6% $48,749,995 7.4% - 11.9%

Emergency dept visit (99285) 5.4% $47,404,916 3.9% - 6.9%

Office/outpatient visit, new (99203) 10.4% $42,348,998 7.9% - 12.9%

PERM CAR PACER IMPL W MAJ CV DX/AICD LEAD/GNRTR

Overall 1.4% $3,866,320,182 1.3% - 1.5%

Hospital visit - 10.9% -

Hospital visit - 14.7% -

Standard imaging - ( 0.6%) -

Lab tests - other

Oncology - radiation ( 0.5%) -

Recovery Audit Contractors (RAC)

Overview of Concerns from the Office of Management and Budget (OMB)

Summary of Total Improper Payments Corrected By the RAC Program – FY 2007

Improper Payments Corrected by the RAC Demonstration

RAC Overpayments Underpayments Repaid Total Improper Payments

Grand Total $992.7 $37.8 1,030.5

The two review processes the RACS use are:

The Permanent RAC Program

The number of medical records selected for a RAC audit

The Medicare Appeals Process

First Level of Appeal—Redetermination